PROJECT REPORT

ON

“CHARACTERISTICS OF ENTREPRENEUR

AND THEIR MOTIVES”

submitted to
University of Mumbai for partial completion of the DEGREE
OF BACHELOR IN MANGEMENT STUDIES

SEMESTER VI
PREPARED BY:
AVADHNARAYAN KRISHNALOCHAN TRIPATHI
ROLL NO. 06
UNDER THE GUIDANCE OF
PROF. KHUSBHOO BHATIA

HINDI BHASHI JANKALYAN SHIKSHAN SANSTHA’S KALYAN

K.M.AGRAWAL COLLEGE OF ARTS,COMMERECE & SCIENCE
AGRWAL COLLEGE ROAD GANDHARE KALYAN 421301

2021-2022
 ACKNOWLEDGMENT

To list who all have helped me is difficult because they are so numerous
And the depth is so enormous.

I would like to acknowledge the following as being idealistic channels

and fresh dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai For giving

Me chance to do this project.

I would like to thank my Principal, Dr. Anita Manna For providing the
Necessary facilities required for completion of this project.

I take this opportunity to thank our Coordinator for her moral Support
And guidance.

I would also like to express my sincere gratitude towards my project

Guide Whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various

Reference books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or
Indirectly helped me in the completion of the project especially My
Parents and Peers Who supported me throughout my project.
 DECLARATION BY LEARNER

I the undersigned Mr. AVADHNARAYAN KRISHNALOCHAN TRIPATHI

Hereby declare the work embodied in this project
AVADHwork titled ““ TRIPATHI
NARAYAN CHARACTER-
STICK OF ENTREPRENEUR AND THEIR MOTIVES” TRTTRIPATHI ISTICS OF
Contribution to the research work carried out under the guidance of is a
ENTREPRENEUR
Result of my own research work and has not been previously submitted
AND THEIR
To any other University for any other Degree / Diploma to this or any
MOTIVES
Other University.

Wherever reference has been made to previous works of others, it has

been clearly indicated as such and included in the bibliography.

I, hereby further declare that all information of this document has been
Obtained and presented in accordance with academic rules and ethical
Conduct.

Name and Signature of the learner

Certified by

Name and signature of the Guiding Teacher

 3

HINDI BHASHI JANKALYAN SHIKSHAN SANSTHA’S KALYAN

K.M.AGRAWAL COLLEGE OF ARTS,COMMERECE & SCIENCE AGRWAL

COLLEGE ROAD GANDHARE KALYAN 421301

CERTIFICATE
This is to certify that Mr AVADHNARAYAN KRISHNALOCHAN TRIPATHI has
worked and duly completed his Project Work for the degree of Master in
Commerce under the Faculty of Commerce in the subject of and his project is
entitled, “CHARACTERISTICS OF ENTREPRENEUR AND THEIR
MOTIVES” under my supervision. I further certify that the entire work has been
done by the learner under my guidance and that no part of it has been submitted
previously for any Degree or Diploma of any University.

It is his own work and faces reported by his personal findings and investigations

(NAME& SIGN OF GUIDE) (INTERNAL EXAMINER)

Guiding Teacher (EXTRNAL EXAMINER)

(CO-ORDINATOR)

Date of submission:
 INDEX
Chapter Topic Page
No. No
Introduction
Chapter:1  Summary
 Entrepreneur
 Entrepreneurship ______

 Intrapreneur
 Start-up

Chapter:2 Idea Generation and Opportunity ______

Assessment
Secondary research
Chapter:3 ______
Project Formation and Appraisal
______
Chapter:4 Institutions Supporting Small Business
Enterprises:

Chapter:5 Government Policy and Taxation Benefits ______

ANNEXURE _____

1. BIBLIOGRAPHY
2. Research DESIGN
3. LIMITATION OF ENTREPNEUR
4. ENTREPRENEUR AND ITS SCOPE
5. OBJECTIVES
6. SUGGESTIONS
7. CONCLUSION
8. WEBLIOGRAPHY
 SUMMARY

An entrepreneur is an individual who creates a new business, bearing most of the

risks and enjoying most of the rewards. The process of setting up a business is
known as entrepreneurship. The entrepreneur is commonly seen as an innovator, a
source of new ideas, goods, services, and business/or procedures

CHARACTERISTICS OF ENTREPRENEUR

 Passion. A start up founder is often driven by the quest for deeper purpose beyond the sheer
mechanics of operating a business. ...

 Perseverance. Entrepreneurs need to be able to deal with obstacles. ...

 Resourcefulness. ...

 Open-Mindedness. ...

 Sponge like nature.

Common traits Common traits Original thinkers Risk takers Take responsibility for own
actions Feel competent and capable Set high goals and enjoy working toward them Common
traits Self-employed parents Firstborns Between years old Well educated – 80% have college
degree and 1/3 have a graduate level degree 7 Successful and Unsuccessful Entrepreneurs
Creative and Innovative Position themselves in shifting or new markets Create new products
Create new processes Create new delivery Unsuccessful Poor Managers Low work ethic
Inefficient Failure to plan and prepare Poor money managers 8 Characteristics of
Entrepreneurs Key Personal Attributes Successful Entrepreneurs Strong Managerial
Competencies Good Technical Skills 9 Key Personal Attributes Entrepreneurs are Made, Not
Born!
 CHAPTER-1
INTRODUCTION OF
ENTREPRENEURS
An entrepreneur is an individual who creates a new
business, bearing most of the risks and enjoying most of
the rewards. The process of setting up a business is known as
entrepreneurship. The entrepreneur is commonly seen as an
innovator, a source of new ideas, goods, services, and
business/or procedures.
 What Is an Entrepreneur?

Entrepreneurs play a key role in any economy, using the skills and
initiative necessary to anticipate needs and bringing good new ideas to
market. Entrepreneurship that proves to be successful in taking on the
risks of creating a startup  is rewarded with profits, fame, and continued
growth opportunities. Entrepreneurship that fails results in losses and
less prevalence in the markets for those involved .

Entrepreneurship: Entrepreneur characteristics –

Classification of Entrepreneurship – Incorporation of Business
– Forms of Business organizations – Role of Entrepreneurship
in economic development – Start-ups.

1.1. Introduction
Entrepreneur is a person of very high aptitude who pioneers change,
on the other extreme of definitions, anyone who wants to work for
himself or herself is considered to be an entrepreneur. The word
entrepreneur originates from the French word, entreprendre, which
means "to undertake." In a business context, it means to start a
business. The Merriam Webster Dictionary presents the definition of
an entrepreneur as one who organizes, manages, and assumes the risks
of a business or enterprise.

Schumpeter’s View of Entrepreneurship

Austrian economist Joseph Schumpeter’s definition of
entrepreneurship placed an emphasis on innovation, such as:
• New products /Services
• New production methods
• New markets
• New forms of organization

Wealth is created when such innovation results in new

demand. From this viewpoint, one can define the function of
the entrepreneur as one of combining various input factors in
an innovative manner to generate value to the customer with
the hope that this value will exceed the cost of the input
factors, thus generating superior returns that result in the
creation of wealth. Entrepreneurship vs. Small Business

Many people use the terms "entrepreneur" and "small business

owner" synonymously. While they may have much in
common, there are significant differences between the
entrepreneurial venture and the small business.
Entrepreneurial ventures differ from small businesses in these
ways:

Amount of wealth creation - rather than simply generating

an income stream that replaces traditional employment, a
successful entrepreneurial venture creates substantial wealth,
typically in excess of several million dollars of profit.

Speed of wealth creation - while a successful small business

can generate several million dollars of profit over a lifetime,
entrepreneurial wealth creation often is rapid; for example,
within 5 years.

Risk - the risk of an entrepreneurial venture must be high;

otherwise, with the incentive of sure profits many
entrepreneurs would be pursuing the idea and the opportunity
no longer would exist.

Innovation - entrepreneurship often involves substantial

innovation beyond what a small business might exhibit. This
innovation gives the venture the competitive advantage that
results in wealth creation. The innovation may be in the
product or service itself, or in the business processes used to
deliver it.

 Entrepreneur A person who is able to identify business

opportunities and implement actions to maximize on the
opportunities. An entrepreneur initiates enterprise creation,
undertakes risks, and manages resources to establish and
operate a business enterprise that is capable of self-
sustenance.
 Definition of Entrepreneur: According to a French
economist, J. B. Say, an entrepreneur is a person who
shifts economic resources out of an area of lower
productivity into an area of higher productivity and greater
yield.
 Definition of Intrapreneur: This is an
employed staff e.g. manager who innovates for
 the company and takes risks only on behalf of
the employer. He is therefore an intra company
entrepreneur for whom the term intrapreneur is
coined. Intrapraneurs are, therefore, the main
entrepreneurs in large companies who innovate and
take risks on behalf of their employer . These are
creative people usually working together as teams, who
function as entrepreneurs within corporations.

1.2. Characteristics of Entrepreneur

1. An eye for opportunity: Many entrepreneurs start by finding a

need and quickly satisfying it. They are always alert to opportunities.
They are very much quick to see and grab opportunities. They plan
intellectually and anticipate carefully how to achieve their goals in
realizing an opportunity.

2. Independence: Even though most entrepreneurs know how to

work within the framework for the sake of profits, they enjoy being
their own boss. They like doing things their own way. The
characteristics of independence and the sense of determination are the
drives that make an entrepreneur start their own business. In a way,
their own business fulfills their need for independence.
3. An appetite for hardwork: Most entrepreneurs start out working long,
hard, hours with little play. Entrepreneurs are always at work even when other
people have stopped. They are persistent and strongly believe that working hard
will help them attain their goals. They hence focus on the end result.
4. Self-confidence: Entrepreneurs must demonstrate extreme self
confidence in order to cope with all the risks of operating their own business.
Most successful entrepreneurs are confident of achieving realistic and
challenging goals. They get into business or industry with a high level of self-
confidence. This, couples with a sense of effectiveness ultimately contribute to
the success of the venture.
5. Discipline: Successful entrepreneurs resist the temptation to do what is
unimportant or the easiest but have the ability to think through what is the most
essential. Entrepreneurs are economically efficient, do not like to waste time
and they like to see work completed. They use discipline as a guide to their
destination.
6. Judgment: Successful entrepreneurs have the ability to think quickly and
make a wise decision. This is possible because they have a plan, they have an
economic goal, they know what they want and they know what they can do.
Entrepreneurs are unaffected by personal likes and dislikes. They stand beyond
these types of prejudices as they are realistic in their approach. At the time of
their need they select experts rather than friends and relatives to assist them.
They usually avoid emotional and sensitive attitude towards their business or
problem.
7. Ability to accept change: Change occurs frequently when you own your
own business, the entrepreneur thrives on changes and their business grow. An
entrepreneur may need to change his/her plans in order to help the business
grow. Entrepreneurs look at many solutions to their problems. They realize that
other people may know how to do something better. Entrepreneurs can choose
the best way to do something, even if it is different from how they want to do it.
8. Make stress work for them: On the roller coaster to business success,
the entrepreneur often copes by focusing on the end result and not the process
of getting there. Entrepreneurs are capable of working for long hours and
solving different complexities at the same time. As the captain of an industry or
an enterprise, an entrepreneur faces a number of problems and in right moment
he takes right decisions which may involve physical as well as mental stress.
9. Need to achieve: Although they keep an “eye” on profit, this is often
secondary to the drive toward personal success. Entrepreneurs have strong
desire to achieve higher goals. Their inner self motivates their behaviour
towards high achievement. To an entrepreneur, winning is achievement.
10. Focus on profits: Successful entrepreneurs always have the profit margin
in sight and know that their business success is measured by profits.
11. Risk-bearing: Entrepreneurs are the persons who take decisions under
uncertainty and thus they are willing to take risk, but they never gamble with
the results. They choose moderate risk rather than play wild gamble. They,
therefore, undertake calculated risk which is high enough to be exciting, but
with a fairly reasonable chance to win.
12. Locus of control: Closely consistent with McClelland‟s theory of need
for achievement, is the belief in internal locus of control. According to Rotter‟s
locus of control theory, an individual perceives the outcome of an event as
being either within or beyond his personal control. Entrepreneurs believe in
their own ability to control the consequences of their endeavour by influencing
their socio-economic environment rather than leave everything to luck. They
strongly believe that they can govern and shape their own destiny.
13. Creative and Innovators: Successful entrepreneurs are innovators. They
constantly put their efforts in introducing new products, new method of
production, opening new markets and reorganizing the enterprise. They always
try not to be satisfied with conventional and routine way of doing things, but
always think of how they can do them in a better way.
14. Leadership: Entrepreneurs should possess the quality of leadership.
Leadership is the ability to exert interpersonal influence by means of
communication towards the achievement of goals. Entrepreneurs as leaders
should provide the necessary spark of motivation by guiding, inspiring,
assisting and directing the members of the group for achievement of unity of
action, efforts and purpose. According to George R. Terry: “Leadership is the
activity of influencing people of strives willingly for group objectives”. Thus, entrepreneur,
as the leader of the group, can ensure high performance by creating a well-to-do environment
among others. They must have the capability to arrive at prompt and correct direction and
win the confidence of their subordinates. Being the leader of the enterprise, they should
possess the following characteristics: o Existence of followers o Assumption of responsibility
o Empathy conduct o Exemplary conduct o Developing teamwork o Common objectivity o
Facilitating change o Building morale o Maintenance of discipline o Active participation
Hence, entrepreneurs by their own leadership styles and behaviour reduce the problems with
careful listening and proper handling of situations. Good administrative work depends upon
effective leadership of the entrepreneur.
15. Ability to mobilize resources: Entrepreneurs must have the ability to marshal all the
inputs to obtain the end product. They have to mobilize 6Ms, i.e. Man, Money, Material,
Machinery, Market and Method effectively to realize the final product as entrepreneurship is
a function of gap filling and input completing.
Conclusion: Entrepreneurs have many qualities that help them their businesses successful.
However, an entrepreneur does not have to possess all the qualities. In that case he has either
to learn or hire the services of those who possess the qualities he does not have.
1.3. Classification of Entrepreneurship
Hans Scholl hammer (1980) has classified entrepreneurship into five categories such as
administrative, opportunistic, acquisitive, incubative and imitative entrepreneurship. But with
the change of time Entrepreneurship classification has increased. Entrepreneurship is
classified in Nine Types;
1. Administrative Entrepreneurship
The entrepreneurial activity under this category is centered around administrative techniques
and functions. It gives a new option to handle prevailing or future situations in a more
effective way that provides advantages and competitive edge.
Total Quality Management, job redesigning, new techniques of doing things, participative
management or management by consensus is a few of the examples of administrative
entrepreneurship that increases overall organizational efficiency and that nukes the firm
successful and sustainable in the competitive market environment.
The old age pension scheme is such an administrative entrepreneurship of the government of
Bangladesh.
2. Opportunistic entrepreneurship
There is a proverb “Hit! while the iron is hot”. It is the best exhibit of the characteristic of this
category of entrepreneurship. Environmental changes always offer new opportunities. But
everybody is not equally capable of identifying and to utilize that opportunity on time. The
entrepreneurship that identifies exploits and executes the opportunity in the first hand
regarded as opportunistic entrepreneurship.
3. Acquisitive entrepreneurship
The entrepreneurship that learns from others competencies is acquisitive entrepreneurship.
It acquires something new of value front, the competitive environment or achieves the
competitors’ technical capacities. It keeps the entrepreneurship sustainable in the competitive
environment.
The failure never restraints them from acquisition but motivates them further to discover such
a thing with a new visitor.
4. Incubative entrepreneurship
This category of entrepreneurship generates and nurses new ideas and ventures within the
organization. It executes them in a productive manner and ensures material gain for the
organization.
They pursue and help to get differentiated technologies to promote creations and innovations
Microsoft, Nokia etc. always incubates new varieties types of product and creates product
differentiation in the market.
5. Imitative entrepreneurship
The entrepreneurship that imitates a good or service operating in the market under a franchise
agreement is the imitative entrepreneurship. It is the medium that spread technology over the
world.
It adopts an existing technology in countries over the world. It also adopts an existing
technology with minor modification appropriate to the local condition.
6. Private Entrepreneurship
The entrepreneurship that is initiated under private sector is private entrepreneurship. The
government gives various support services through private and public concerns that
encourage private initiative in taking entrepreneurial ventures.
A layer and mutual relationship between private and public sectors would make economic
development speedy and balanced
7. Public entrepreneurship
The entrepreneurship that is undertaken by the government through its various development
agencies is public entrepreneurship. All countries, developed or underdeveloped, take a
public initiative in venture ideas to fulfil the initial deficiency of private entrepreneurs.
8. Individual entrepreneurship
The entrepreneurship that is undertaken by an individual or a family with the personal
initiative is individual entrepreneurship.
9. Mass Entrepreneurship
This type of entrepreneurship emerges in an economy where a favorable climate of
motivation and encouragement exist for developing a wide range of entrepreneurship among
general mass is mass entrepreneurship.’ It increases small and medium enterprises in a
country.

1.3.1. Types of Entrepreneurs:

Classification on the basis of:
1. Types of Business: Business entrepreneur, trading entrepreneur, industrial entrepreneur,
corporate entrepreneur and agricultural entrepreneur.
2. Use of technology: technical entrepreneur, non-technical entrepreneur and professional
entrepreneur.
3. Motivation: pure entrepreneur, induced entrepreneur, motivated entrepreneur and
spontaneous entrepreneur.
4. Growth: growth entrepreneur and super growth entrepreneur.
5. Stages in development: First generation entrepreneur, modern entrepreneur and classical
entrepreneur.
6. Others: Area (rural and urban), gender (men and women), scale (micro, small and
medium).
1.4. Incorporation of Business and Forms of Business organizations
Incorporation describes the process of creating a new business structure where that business
becomes a recognized entity or person under the law. Once created, this new legal entity can
be treated separately from its founders or shareholders, potentially reducing liability for its
shareholders and gaining other benefits that could help the business grow and thrive long
term.
Incorporation involves drafting legal documents called "Articles of Incorporation" that list the
primary purpose of the business, its name and its location, and the number of shares and class
of stock being issued, if any. Incorporation also involves jurisdiction-specific registration
information and fees.
Companies are owned by their shareholders. Small companies can have a single shareholder,
while very large and often publicly traded companies can have several thousand shareholders.
As a rule, the shareholders are only responsible for the payment of their own shares. As
owners, the shareholders are entitled to receive the profits of the company, usually in the
form of dividends. The shareholders also elect the directors of the company.
The directors of the company are responsible for the day-to-day activities of the company.
They owe a duty of care to the company and must act in its best interest. They are usually
elected annually. Smaller companies can have a single director, while larger ones often have
a board comprised of a dozen or more directors. Except in cases of fraud or in some specific
tax statutes, the directors do not have personal liability for the company's debts.
Advantages of incorporation:
There are plenty of benefits to incorporating the business. They are
 1. Protection of personal assets
2. Transferable ownership
3. Less taxes
4. Increased durability
5. Separate credit rating regardless of owners personal score
6. Easier to create retirement plans
Disadvantages of Incorporation
There are disadvantages of incorporation as well - especially to small business owners.
1. Heavy paperwork is needed
2. Professional fees would be high
3. Liability protection isn't guaranteed
There are various forms of business entities in India:
• Private Ltd Company
• Public Ltd Company
• Unlimited Company
• Sole proprietorship
• Joint Hindu Family business
• Partnership
• Cooperatives
• Limited Liability Partnership(LLP)
• Liaison Office
• Branch Office
• Project Office
• Subsidiary Company
Private Ltd Company
A private company has the following features
1. Restricts the right of the shareholders to transfer their shares.
2. Has a minimum of 2 and maximum of 50 members.
3. does not invite public to subscribe to its share capital
4. Must have a minimum paid up capital of Rs. 1 lakh or such a higher amount which
may be prescribed from time to time.
Public Ltd Company:
A public Ltd company has the following characteristics
 1. It allows the shareholders to transfer their shares.
2. Has a minimum of 7 members, and for maximum there is no limit.
3. it invites the general public to subscribe to its shares
4. Must have a minimum paid up capital of Rs 5 lakh or such a higher amount as may be
prescribed from time to time.

Unlimited Company
Unlimited Company is a form of business organization under which the liability of all its
members is unlimited. The personal assets of the members can be used to settle the debts. It
can at any time re-register as a limited company under section 32 of the Companies Act. Sole
proprietorship
Sole proprietorship is a form of business entity where a single individual handles the entire
business organization. He is the sole recipient of all profits and bearer of all loses. There is no
separate law that governs sole proprietorship.
Joint Hindu Family
Joint Hindu Family is a form of business organization wherein the members of a family can
only own and manage the business. It is governed by Hindu Law
Partnership
Partnership is “the relation between persons who have agreed to share the profits of the
business carried on by all or any one of them acting for all”. It is governed by the Indian
Partnership Act 1932.
Co-operatives
Co-operatives is a form of voluntary organization, wherein the members work together for the
promotion of the interests of its members. There is no restriction to the entry or exit of any
member. It is governed by Cooperative Societies Act 1912.
Limited Liability Partnership
Under LLP (Limited Liability Partnership) the liability of at least one member is unlimited
whereas rest all the other members have limited liability, limited to the extent of their
contribution in the LLP. Unlike general partnership this kind of partnership does not get
terminated by the death or insolvency of the limited partners. It is governed by Limited
Liability Partnership Act of 2008.
1.5. Role of entrepreneurship in economic development and start ups
1. Employment opportunities
Entrepreneurs employ labour for managing their business activities and provide employment
opportunities to a large number of people. They remove unemployment problem.
2. Balanced Regional Development
Government promotes decentralized development of industries as most of the incentives are
granted for establishing industries in backward and rural areas. Thus, the entrepreneurs to
avail the benefits establish industries in backward and rural areas.
They remove regional disparities and bring balanced regional development. They also help to
reduce the problems of congestion, slums, sanitation and pollution in cities by providing
employment and income to people living in rural areas. They help in improving the standard
of living of the people residing in suburban and rural areas.
3. Mobilization Of Local Resources
Entrepreneurs help to mobilize and utilize local resources like small savings and talents of
relatives and friends, which might otherwise remain idle and unutilized. Thus they help in
effective utilization of resources.
4. Optimization Of Capital
Entrepreneurs aim to get quick return on investment. They act as a stabilizing force by
providing high output capital ratio as well as high employment capital ratio.
5. Promotion of Exports
Entrepreneurs reduce the pressure on the country’s balance of payments by exporting their
goods they earn valuable foreign exchange through exports.
6. Consumer Demands
Entrepreneurs produce a wide range of products required by consumers. They meet the
demand of the consumers without creating a shortage for goods.
7. Social Advantage
Entrepreneurs help in the development of the society by providing employment to people and
paves for independent living They encourage democracy and self-governance. They are adept
in distributing national income in more efficient and equitable manner among the various
participants of the society. 8. Increase per capita income
Entrepreneurs help to increase the per capita income of the country in various ways and
facilitate development of backward areas and weaker sections of the society.
9. Capital formation
A country can attain economic development only when there is more amount of investment
and production. Entrepreneurs help in channelizing their savings and savings of the public to
productive resources by establishing enterprises. They promote capital formation by
channelizing the savings of public to productive resources.
10. Growth of capital market
Entrepreneurs raise money for running their business through shares and debentures. Trading
of shares and debentures by the public with the help of financial services sector leads to
capital market growth.
11. Growth of infrastructure
The infrastructure development of any country determines the economic development of a
country, Entrepreneurs by establishing their enterprises in rural and backward areas influence
the government to develop the infrastructure of those areas.
12. Development of Trader
Entrepreneurs play an important role in the promotion of domestic trade and foreign trade.
They avail assistance from various financial institutions in the form of cash credit, trade
credit, overdraft, short term loans, secured loans and unsecured loans and lead to the
development of the trade in the country.
13. Economic Integration
Entrepreneur reduces the concentration of power in a few hands by creating employment
opportunities and through equitable distribution of income. Entrepreneurs promote economic
integration in the country by adopting certain economic policies and laws framed by the
government. They help in removing the disparity between the rich and the poor by adopting
the rules and regulation framed by the government for the effective functioning of business in
the country.
14. Inflow of Foreign Capital
Entrepreneurs help to attract funds from individuals and institutions residing in foreign
countries for their businesses.
Start-up:
Start-up means an entity, incorporated or registered in India
• Not prior to seven years, however for Biotechnology Startups not prior to ten years,
• With annual turnover not exceeding INR 25 crore in any preceding financial year, and
• Working towards innovation, development or improvement of products or processes
or services, or if it is a scalable business model with a high potential of employment
generation or wealth creation
Provided that such entity is not formed by splitting up, or reconstruction, of a business
already in existence. Provided also that an entity shall cease to be a Startup if its turnover for
the previous financial years has exceeded INR 25 crore or it has completed 7 years and for
biotechnology start-ups 10 years from the date of incorporation/ registration. Provided further
that a Startup shall be eligible for tax benefits only after it has obtained certification from the
Inter-Ministerial Board, setup for such purpose.

Benefits from the government for startups:

Start-ups are becoming very popular in India. The government under the leadership of PM
Narendra Modi has started and promoted Start-up India.
To promote growth and help Indian economy, many benefits are being given to entrepreneurs
establishing start-ups.
1. Simple process
Government of India has launched a mobile app and a website for easy registration for
startups. Anyone interested in setting up a startup can fill up a simple form on the website and
upload certain documents. The entire process is completely online.
2. Reduction in cost
The government also provides lists of facilitators of patents and trademarks. They will
provide high quality Intellectual Property Right Services including fast examination of
patents at lower fees. The government will bear all facilitator fees and the startup will bear
only the statutory fees. They will enjoy 80% reduction in cost of filing patents.
3. Easy access to Funds
A 10,000 crore rupees fund is set-up by government to provide funds to the startups as
venture capital. The government is also giving guarantee to the lenders to encourage banks
and other financial institutions for providing venture capital.
4. Tax holiday for 3 Years
Startups will be exempted from income tax for 3 years provided they get a certification from
Inter-Ministerial Board (IMB).
5. Apply for tenders
Startups can apply for government tenders. They are exempted from the “prior
experience/turnover” criteria applicable for normal companies answering to government
tenders.
6. R&D facilities
Seven new Research Parks will be set up to provide facilities to startups in the R&D sector
 7. No time-consuming compliances
Various compliances have been simplified for startups to save time and money. Startups shall
be allowed to self-certify compliance (through the Startup mobile app) with 9 labour and 3
environment laws.
8. Tax saving for investors
People investing their capital gains in the venture funds setup by government will get
exemption from capital gains. This will help startups to attract more investors.
9. Choose your investor
After this plan, the start-ups will have an option to choose between the VCs, giving them the
liberty to choose their investors.
10. Easy exit
In case of exit – A start up
can close its business within 90 days from the date of application of winding up
11. Meet other entrepreneurs
Government has proposed to hold 2 start-up fests annually both nationally and internationally
to enable the various stakeholders of a start up to meet. This will provide huge networking
opportunities.
CHAPTER-2
Idea Generation and Opportunity
Assessment
Ideas in Entrepreneurships – Sources of New Ideas – Techniques for generating
ideas – Opportunity Recognition – Steps in tapping opportunities.

2.1. Ideas in Entrepreneurships

A business idea is a concept that can be used for financial gain that is usually centered on a
product or service that can be offered for money. An idea is the base of the pyramid when it
comes to the business as a whole.
The characteristics of a promising business idea are:
• Innovative
• Unique
• Problem solving
• Profitable

2.2. Sources of New Ideas

The concept of generating a new business idea is not only essential for intending or
prospective entrepreneurs, existing business owners also need to understand how new
business ideas can change the level of business operations that invariably will lead to greater
productivity and success.
It is an establish fact that for any existing business to experience growth and expansion, idea
generation, creativity and innovation are three necessary factors that must come together in
application and practice.
 Below are some of the more frequently used sources of idea for existing and prospective
entrepreneur.

 From consumer or target audience

Every creative and innovative entrepreneur must pay close attention to potential customers,
client or consumers on a continuous basic. This kind of attention can take an informal
approach of personally monitoring potential ideas affecting the needs of customers or
formally arranging for customers/consumer to have opportunity to express their opinion. This
could be achieving through a comprehensive survey/questionnaire or forum. The ideas or
opinion generated from the target audience must be to a large extent represent enough market
to support a new business or expand a section of an existing business.
 From existing products and services
Existing products and services could be carefully monitored and evaluated to uncover ways to
improve them. This might results in a new product or service that has more market appeal and
better sales and profit potential.
In this period of advancement in information communication technology (ICT), creative and
innovative approach of ICT can have far-reaching effect on existing products and services.
Prospective entrepreneurs can therefore take advantage of information communication
technology (ICT) to build new variant of old products or services with a more market appeal,
better sales and profit potentials.
 From marketing distribution channels
For a product that involve a marketing distribution channel (sale representative group),
members of such distribution channels are also excellent sources for new business ideas,
because of their familiarity with the needs of the market.
For example, let’s imagine that a company has ten sales persons in one zone. In each month,
every member of the group can itemize why his/her sales is high, low or below average. Ideas
gotten from such analysis could become a source of innovation and creativity that will lead to
a better business idea in marketing.
 From research and development
The greatest source of a new business idea is the entrepreneur’s own effort in research and
development.
The quest to gather information, ask questions from existing entrepreneurs, analyze economic
data and information within the market can lead to a unique business concept.
The prospective entrepreneur’s creativity and innovation coupled with foresight and much
research can be a source of business idea.
 From the Government of the day
The federal, state and local government can be a source of new products or business ideas in
two ways.
First, basis information about products/services is obtained from government data bank or
statistical unit like the National Bureau of Statistics (NBS). A thorough analysis of such data
can provide clear guides to new area of business.
Secondly, new product ideas can come in response to government regulations or policies. For
examples the current regulations by the federal government that telecommunication
operators/company should register their subscribers.
This could be an open door to greater services by their distributors, even though registration
is free. An area of local content management system can also evolve as the result of this
government policy, thus creating new business opportunity for the operators in the near
future.

2.3. Techniques for generating

ideas
1. SCAMPER
SCAMPER is an idea generation technique that utilizes action verbs as stimuli. It is a well-
known kind of checklist developed by Bob Eberie that assists the person in coming up with
ideas either for modifications that can be made on an existing product or for making a new
product. SCAMPER is an acronym with each letter standing for an action verb which in turn
stands for a prompt for creative ideas.
• S – Substitute
• C – Combine
• A – Adapt
• M – Modify
• P – Put to another use
• E – Eliminate
• R – Reverse

2. Brainstorming
This process involves engendering a huge number of solutions for a specific problem (idea)
with emphasis being on the number of ideas. In the course of brainstorming, there is no
assessment of ideas. So, people can speak out their ideas freely without fear of criticism.
Even bizarre/strange ideas are accepted with open hands. In fact, the crazier the idea, the
better. Taming down is easier than thinking up.
Frequently, ideas are blended to create one good idea as indicated by the slogan “1+1=3.”
Brainstorming can be done both individually and in groups. The typical brainstorming group
comprises six to ten people.
3. Mind mapping
Mind mapping is a graphical technique for imagining connections between various pieces of
information or ideas. Each fact or idea is written down and then connected by curves or lines
to its minor or major (previous or following) fact or idea, thus building a web of
relationships. It was Tony Buzan, a UK researcher, who developed the technique “mind
mapping” discussed in his book ‘Use your Head’ (1972). Mind mapping is utilized in
brainstorming, project planning, problem solving and note taking. As is the case with other
mapping methods, the intention behind brain mapping too is to capture attention and to gain
and frame information to enable sharing of concepts and ideas.
To get started with mind mapping, the participant just has to write a key phrase or word in the
middle of the page. Then, he must write anything else that comes to his mind on the very
same page. After that, he must try to make connections as mentioned in the previous
paragraph.

. 4. Synaptic
Synaptic is a creative idea generation and problem solving technique that arouses thought
processes that the subject may not be aware of. It is a manner of approaching problemsolving
and creativity in a rational manner. The credit for coming up with the technique which had its
beginning in the Arthur D. Little Invention Design Unit, goes to William J.J.
Gordon and George M. Prince.
The Synaptic study endeavoured to investigate the creative process while it is in progress.
According to J.J Gordon, three key assumptions are associated with Synaptic research.
• It is possible to describe and teach the creative process
• Invention processes in sciences and the arts are analogous and triggered by the very
same “psychic” processes
• Group and individual creativity are analogous
5. Storyboarding
Storyboarding has to do with developing a visual story to explain or explore. Storyboards can
help creative people represent information they gained during research. Pictures, quotes from
the user, and other pertinent information are fixed on cork board, or any comparable surface,
to stand for a scenario and to assist with comprehending the relationships between various
ideas.
6. Role playing
In the role playing technique, each participant can take on a personality or role different from
his own. As the technique is fun, it can help people reduce their inhibitions and come out with
unexpected ideas.
7. Attribute listing
Attribute listing is an analytical approach to recognize new forms of a system or product by
identifying/recognizing areas of improvement. To figure out how to enhance a particular
product, it is broken into parts, physical features of each component are noted, and all
functions of each component are explained and studied to see whether any change or
recombination would damage or improve the product.
8. Visualization and visual prompts
Visualization is about thinking of challenges visually so as to better comprehend the issue. It
is a process of incubation and illumination where the participant takes a break from the
problem at hand and concentrates on something wholly different while his mind
subconsciously continues to work on the idea. This grows into a phase of illumination where
the participant suddenly gets a diversity of solutions and he rapidly writes them down,
thereby creating fresh parallel lines of thought.
Picture prompts help a lot when it comes to enabling one’s brain to establish connections.
These prompts can help to surface emotions, feelings and intuitions. This makes them
particularly useful for brainstorming solutions to innovative challenges involving people, and
issues with a deep psychological or emotional root cause.
To get started with using picture prompts, the facilitator distributes a set of pre-selected
images – each participant gets one. He also asks the participants to write down whatever
ideas come to their mind when they look at the image in their possession. According to Bryan
Mattimore (presently co-founder of The Growth Engine Company), the images should be
visually interesting, portraying a multiplicity of subject matter and must depict people in lots
of varied kinds of relationships and interactions with other people.
After this, participants pair off and use additional time, sharing and talking about the ideas
they have come up with and brainstorming more solutions to the existing problem/challenge.
Lastly, the various pairs present their ideas to the rest of the group.
Mattimore suggests tailoring the visuals to the character of the challenge the participants have
to solve. So, if the challenge pertains to the manufacturing industry, you could consider
having images of an industrial nature. However, you should definitely include some
irrelevant or random images as well because it may be these kinds of images that trigger the
most innovative solutions.
9. Morphological analysis
Morphological analysis has to do with recognizing the structural aspects of a problem and
studying the relationships among them. For example: Imagine the problem is transporting an
object from one place to another by way of a powered vehicle. The significant dimensions
are: the kind of vehicle (cart, sling, bed, chair); the power source (internal-combustion
engine, pressed air, electric motor); and the medium (air, hard surface, rails, rollers, oil,
water). Thus, a cart-kind of vehicle moving over rough services with an internal-combustion
engine to power it is the automobile. The expectation is that it would be possible to determine
some novel combinations.

10. Forced relationships

It is an easy technique involving the joining of totally different ideas to come up with a fresh
idea. Though the solution may not be strictly unique, it frequently results in an assortment of
combinations that are often useful. A lot of products we see today are the output of forced
relationships (such as a digital watch that also has a calculator, musical birthday cards and
Swiss army knife). Most of these ideas may not be revolutionary discoveries but they are still
advantageous products and usually have a prospective market in society. Robert Olson
provided an example for forced analogy in his book ‘The Art of Creative Thinking.’ He
compares different aspects of a corporate organization structure to the structure of a
matchbox.
11. Daydreaming
Though mostly not met with approval, daydreaming is truly one of the most fundamental
ways to trigger great ideas. The word “daydream” itself involuntarily triggers an uninhibited
and playful thought process, incorporating the participant’s creativity and resourcefulness to
play around with the present problem. It enables a person to establish an emotional
connection with the problem, which is beneficial in terms of coming up with a wonderful
idea. The focus of productive daydreaming is a particular goal irrespective of whether it
seems to be an impractical task. Plenty of famous inventors have engaged in daydreaming in
the past, thereby setting off ideas that contributed to life altering inventions. The airplane is
the most notable example for this. If the Wright brothers had not let their imagination run
wild thinking about flight, we would probably still be traveling by ferry.
12. Reverse thinking
As the term ‘reverse thinking’ itself suggests, instead of adopting the logical, normal manner
of looking at a challenge, you reverse it and think about opposite ideas. For example: ‘how
can I double my fan base?’ can change into ‘how do I make sure I have no fans at all?’ You
may notice that the majority of participants would find it easier to produce ideas for the
‘negative challenge’ simply because it is much more fun. However, don’t spend too much
time on the reverse idea-generation – about 10 to 15 wrong ideas is fine. After one session is
over, you can either continue in the reverse idea atmosphere with a new challenge or else do
the reversal once more to make it stronger. An example for the latter is “I am never going to
update any of my social networks” changing into “I am going to always update all of my
social networks.”

13. Questioning assumptions

The majority of industries have orthodoxy – unspoken but deeply-held beliefs that everyone
stands by for getting things done. Sadly, they fail to realize that by questioning assumptions
at every step of service or product development, they can actually enable the birth of fresh
possibilities and ideas.
Here’s how Mattimore suggests one go about questioning assumptions: The participants
should start by settling on the framework for the creative challenge. After this, they should
produce 20 to 30 assumptions (irrespective of whether they are true or false). The next step is
to select several assumptions from the many generated, and utilize them as idea triggers and
thought starters to engender fresh ideas.
14. Accidental genius
Accidental genius is a relatively new technique that utilizes writing to trigger the best ideas,
content and insight.
15. Brainwriting
Brainwriting is easy. Instead of asking the participants to shout out ideas, they are told to pen
down their ideas pertaining to a specific problem or question on sheets of paper, for a small
number of minutes. After that, each participant can pass their ideas over to someone else.
This someone else reads the ideas on the paper and adds some new ones. Following another
few minutes, the individual participants are again made to pass their papers to someone else
and so the process continues. After about 15 minutes, you or someone else can collect the
sheets from them and post them for instant discussion.
16. Wishing
This technique can be begun by asking for the unattainable and then brainstorming ideas to
make it or at least an approximation of it, a reality. Start by making the wishes tangible.
There should be collaboration among the members of the team to produce 20 to 30 wishes
pertaining to your business. Everyone’s imagination should be encouraged to run wild – the
more bizarre the idea, the better. There should be no restrictions on thinking.
The next step is concentrating on a number of these unattainable wishes and utilizing them as
creative stimuli to trigger ideas that are new but more practical. Mattimore suggests getting
the team to challenge the problem from diverse perspectives (imagine how a person from
another planet or from another industry or profession would view it) or reflect on it. This type
of role playing assists with moving away from conventional thinking patterns to see fresh
possibilities.

17. Socializing
If employees only hang around with colleagues and friends, they could find themselves in a
thinking rut. Let them utilize all those LinkedIn connections to begin some fantastic
conversations. Refreshing perspectives will assist with bringing out new thinking and
probably, one or two lightning bolts. Socializing in the context of ideation can also be about
talking to others on topics that have nothing whatsoever to do with the present problem.

18. Collaboration
As the term indicates, collaboration is about two or more people joining hands in working for
a common goal. Designers frequently work in groups and engage in collaborative creation in
the course of the whole creative process.

2.4. Opportunity recognition:

1. An opportunity is a favourable set of circumstances that creates a need for a new product,
service, or business.
2. An opportunity has four essential qualities: these are…
3. For an entrepreneur to capitalize on an opportunity, its window of opportunity must be
open.
a) The term “window of opportunity” is a metaphor describing the time period in
which a firm can realistically enter a new market.
b) Once the market for a new product is established, its window of opportunity opens,
and new entrants flow in.
c) At some point, the market matures, and the window of opportunity (for new entrants)
closes.
4. It is important to understand that there is a difference between an opportunity and an idea.
a) An idea is a thought, impression, or notion
b) May or may not meet the criteria of an opportunity.
c) Many businesses fail not because the entrepreneurs that started them didn’t work hard, but
because there was no real opportunity to begin with.
2.5. Steps in tapping opportunities:

1. Observing Trends: The first approach to identifying opportunities is to observe trends and
study how they create opportunities for entrepreneurs to pursue.
i) Economic Forces:
a. Economic forces affect consumers’ level of disposable income. Individual sectors of
the economy have a direct impact on consumer buying patterns.
b. For example, a drop in interest rates typically leads to an increase in new home
construction and furniture sales; large firms source out etc.
c. Getting a handle on these forces by: (i) studying and observing and (ii) purchasing
market forecasts/analyses ii) Social Factors: An understanding of the impact of social forces
on trends and how
a. They affect new product, service, and business ideas is a fundamental piece of the
opportunity recognition puzzle.
Example: The persistent proliferation of fast food restaurants isn’t due primarily to people’s
love for fast food but rather to the fact that people are busy: the number of households with
both parents working remains high.
Example: Similarly, the Sony Walkman was developed not because consumers
wanted smaller radios but because
people wanted to listen to music
while on the go.
b. Some of the recent social
trends that allow for new
opportunities are the following:
• Family and work patterns
• The aging of the population
• The increasing diversity of
the workforce
• The globalization of
industry
• The increasing focus on
health care and fitness
• The proliferation of
computers and the Internet
• The continual increase in the number of cell phone users
• New forms of music and other types of entertainment
• iii) Technological Advances:
a. Given the rapid pace of technological change, it is vital for entrepreneurs to remain on top
of how new technologies affect current and future opportunities. b. Once a technology is
created, products emerge to advance it.
c. Advances in technology frequently dovetail with economic and social changes to create
opportunities.
Example: creation of cell phone is a technological achievement, but was motivated by an
increasingly mobile population.
iv) Political Action and Regulatory Changes: Political action and regulatory changes also
provide the basis for opportunities.
Ex: Example: new laws create opportunities for entrepreneurs to start firms to help companies
comply with these laws
2. Solving a Problem:
1. Sometimes identifying opportunities simply involves noticing a problem and finding a
way to solve it.
2. These problems can be pinpointed through observing trends and through more simple
means, such as intuition, serendipity, or chance.
3. Some business ideas are clearly gleaned from the recognition of problems in emerging
trends.
Examples:
a. Symantec Corp. created Norton antivirus software to rid computers of viruses
b. Process is sometimes less deliberate: individual may set out to solve a practical problem
and realize that the solution may have broader appeal
c. At still other times, someone may simply notice a problem that others are having and think
that the solution might represent an opportunity.
d. A “serendipitous discovery” is a chance discovery made by someone with a prepared mind.
3. Filling the Gaps in the market place:
1. The third approach to identifying opportunities is to recognize a need that consumers
have that is not being satisfied—by either large, established firms or entrepreneurial ventures.
2. There are also gaps in the marketplace that represent consumer needs that aren’t being
met by anyone.
 Personal Characteristics of the Entrepreneur:
Researchers have identified several characteristics that tend to make some people better at
recognizing opportunities than others.
 Prior Experience. Several studies have shown that prior experience in an industry
helps an entrepreneur recognize business opportunities. There are several explanations
for this:
a. By working in an industry, an individual may spot a market niche that is underserved.
b. It is also possible that by working in an industry, an individual builds a network of social
contacts who provide insights that lead to recognizing new opportunities.
2. Cognitive Factors – Opportunity recognition may be an innate skill or a cognitive process.
a) Studies have shown that opportunity recognition may be an innate skill or
cognitive process.
b) Some people believe that entrepreneurs have a “sixth sense” that allows them to see
opportunities that others miss.
c) This “sixth sense” is called “entrepreneurial alertness”, which is formally defined as
the ability to notice things without engaging in deliberate search.
3. Social Networks – The extent and depth of an individual’s social network affects
opportunity recognition.
a) People who build a substantial network of social and professional contacts will be exposed
to more opportunities and ideas than people with sparse networks. This exposure can lead
to new business starts.
b) The extent and depth of an individual’s social
network affects opportunity recognition.
c) In one survey of 65 start ups, half the founders
reported that they got their business idea
through social contacts.
d) Nature of Strong Tie Vs. Weak Tie Relationships
i. Strong tie relationship are characterized by frequent interaction between co-workers,
friends, and spouses.
ii. Weak tie relationships are characterized by infrequent interaction and form between
casual acquaintances.
iii. Result: it is more likely that an entrepreneur will get new business ideas through weak
tie rather than strong tie relationships.
4. Creativity – Is the process of generating a novel or useful idea. For an individual, the
creative process can be broken into five stages:
a) Preparation – Is the background, experience, and knowledge that an entrepreneur brings to
the opportunity recognition process.
b) Incubation stage during which a person considers an idea thinks about a problem; it is the
“mulling things over” phase.
c) Insight – Insight is the flash of recognition – when the solution to a problem is seen or an
idea is born.
d) Evaluation –stage of the creative process during which an idea is subjected to scrutiny and
analysed for its viability.
e) Elaboration –stage during which the creative idea is put into a final form; details are
worked out and idea is transformed into valuable.

Insight
Business Idea conceived
and Problem
Preparation solved Elaboration

Incubation Evaluation
 CHAPTER- 3
Project Formation and Appraisal :
Preparation of Project report – Content: Guidelines for Report Preparation - Project Appraisal
techniques – Economic – Steps Analysis: Financial Analysis; Market Analysis; Technical
Feasibility.

3.1. Meaning & Contents:

Project Report is a written document relating to any investment. It contains data on the basis
of which the project has been appraised and found feasible. It consists of information on
economic, technical, financial, managerial and production aspects. It enables the entrepreneur
to know the inputs and helps him to obtain loans from banks or financial Institutions.
The project report contains detailed information about Land and buildings required,
Manufacturing Capacity per annum, Manufacturing Process, Machinery & equipment along
with their prices and specifications, Requirements of raw materials, Requirements of Power
& Water, Manpower needs, Marketing Cost of the project, production, financial analyses and
economic viability of the project.

Objectives of project report:

• To identify the requirement of the resources (technical, financial, commercial,
managerial and operational)
• To find out the critical components of the project idea.
• To obtain the opinions of experts from various fields.
• To facilitates financial appraisal of the project by financial institutions, banks,
insurance companies, etc.
1. General Information
A project report must provide information about the details of the industry to which the
project belongs to. It must give information about the past experience, present status,
problems and future prospects of the industry. It must give information about the product to
be manufactured and the reasons for selecting the product if the proposed business is a
manufacturing unit. It must spell out the demand for the product in the local, national and the
global market. It should clearly identify the alternatives of business and should clarify the
reasons for starting the business.
2. Executive Summary
A project report must state the objectives of the business and the methods through which the
business can attain success. The overall picture of the business with regard to capital,
operations, methods of functioning and execution of the business must be stated in the project
report. It must mention the assumptions and the risks generally involved in the business.
3. Organization Summary
The project report should indicate the organization structure and pattern proposed for the unit.
It must state whether the ownership is based on sole proprietorship, partnership or Joint Stock
Company. It must provide information about the bio data of the promoters including financial
soundness. The name, address, age qualification and experience of the proprietors or
promoters of the proposed business must be stated in the project report.
4. Project Description
A brief description of the project must be stated and must give details about the following:
 Location of the site,
 Raw material requirements,
  Target of production,
 Area required for the work shed,
 Power requirements,
 Fuel requirements,
 Water requirements,
 Employment requirements of skilled and unskilled labour,
 Technology selected for the project,
 Production process,
 Projected production volumes, unit prices,  Pollution treatment plants required.
If the business is service oriented, then it must state the type of services rendered to
customers. It should state the method of providing service to customers in detail.
5. Marketing Plan
The project report must clearly state the total expected demand for the product. It must state
the price at which the product can be sold in the market. It must also mention the strategies to
be employed to capture the market. If any, after sale service is provided that must also be
stated in the project. It must describe the mode of distribution of the product from the
production unit to the market. Project report must state the following:
 Type of customers,
 Target markets,
 Nature of market,
 Market segmentation,
 Future prospects of the market,
 Sales objectives,
 Marketing Cost of the project,
 Market share of proposed venture,
 Demand for the product in the local, national and the global market,
 It must indicate potential users of products and distribution channels to be used for
distributing the product.
6. Capital Structure and operating cost
The project report must describe the total capital requirements of the project. It must state the
source of finance, it must also indicate the extent of owners funds and borrowed funds.
Working capital requirements must be stated and the source of supply should also be
indicated in the project. Estimate of total project cost, must be broken down into land,
construction of buildings and civil works, plant and machinery, miscellaneous fixed assets,
preliminary and preoperative expenses and working capital.
Proposed financial structure of venture must indicate the expected sources and terms of equity
and debt financing. This section must also spell out the operating cost
7. Management Plan
The project report should state the following.
a. Business experience of the promoters of the business,
b. Details about the management team,
c. Duties and responsibilities of team members,
d. Current personnel needs of the organization,
e. Methods of managing the business,
f. Plans for hiring and training personnel,
g. Programmes and policies of the management.
8. Financial Aspects
In order to judge the profitability of the business a projected profit and loss account and
balance sheet must be presented in the project report. It must show the estimated sales
revenue, cost of production, gross profit and net profit likely to be earned by the proposed
unit. In addition to the above, a projected balance sheet, cash flow statement and funds flow
statement must be prepared every year and at least for a period of 3 to 5 years.
The income statement and cash flow projections should include a three-year summary, detail
by month for the first year, and detail by quarter for the second and third years. Break even
point and rate of return on investment must be stated in the project report. The accounting
system and the inventory control system will be used is generally addressed in this section of
the project report. The project report must state whether the business is financially and
economically viable.
9. Technical Aspects
Project report provides information about the technology and technical aspects of a project. It
covers information on Technology selected for the project, Production process, capacity of
machinery, pollution control plants etc.
10. Project Implementation
Every proposed business unit must draw a time table for the project. It must indicate the time
within the activities involved in establishing the enterprise can be completed. Implementation
schemes show the timetable envisaged for project preparation and completion.
11. Social responsibility
The proposed unit draws inputs from the society. Hence its contribution to the society in the
form of employment, income, exports and infrastructure. The output of the business must be
indicated in the project report.
3.2. Steps for Project Preparation:
• General Information
• Preliminary analysis of alternatives
• Project Description
• Marketing Plan
• Capital Requirement & Costs
• Operating Requirement & Costs
• Financial Analysis
• Economic Analysis
• Miscellaneous analysis
Elements in Project Formulation:
 Feasibility analysis
 Techno-economic analysis
 Project design and network analysis
 Input analysis
 Financial analysis
 Social cost benefit analysis
 Project appraisal
3.3. Guidelines for Project Preparation:
Company seeking financial assistance for implementation of its business idea is required to
prepare a Project Report covering certain important aspects of the project as detailed below:
• Promoters background/experience
• Product with capacity to be built up and processes involved
• Project location
• Cost of the Project and Means of financing thereof
• Availability of utilities
• Technical arrangements
• Market Prospects and Selling arrangements
 • Environmental aspects
• Profitability projections and Cash flows for the entire repayment period of financial
assistance
3.3. Project Appraisal Techniques:
1. Economic Analysis:
Under economic analysis, the project aspects highlighted include requirements for raw
material, level of capacity utilization, anticipated sales, anticipated expenses and the probable
profits. It is said that a business should have always a volume of profit clearly in view which
will govern other economic variables like sales, purchases, expenses and alike.
Demand for the product needs to be carefully spelled out as it is, to a great extent, deciding
factor of feasibility of the project concern.
In addition to above, the location of the enterprise decided after considering a gamut of points
also needs to be mentioned in the project. The Government offers specific incentives and
concessions for setting up industries in notified backward areas.
2. Financial Analysis:
Finance is one of the most important pre-requisites to establish an enterprise. It is finance
only that facilitates an entrepreneur to bring together the labour of one, machine of another
and raw material of yet another to combine them to produce goods.
In order to adjudge the financial viability of the project, the following aspects need to be
carefully analysed:
1. Assessment of the financial requirements both – fixed capital and working capital need
to be properly made. You might be knowing that fixed capital normally called ‘fixed
assets’ are those tangible and material facilities which purchased once are used again and
again. Land and buildings, plants and machinery, and equipment’s are the familiar
examples of fixed assets/fixed capital. The requirement for fixed assets/capital will vary
from enterprise to enterprise depending upon the type of operation, scale of operation and
time when the investment is made. But, while assessing the fixed capital requirements, all
items relating to the asset like the cost of the asset, architect and engineer’s fees,
electrification and installation charges (which normally come to 10 per cent of the value of
machinery), depreciation, preparation expenses of trial runs, etc., should be duly taken into
consideration. Similarly, if any expense is to be incurred in remodeling, repair and
additions of buildings should also be highlighted in the project report.
2. In accounting, working capital means excess of current assets over current liabilities.
Generally, 2: 1 is considered as the optimum current ratio. Current assets refer to those
assets which can be converted into cash within a period of one week. Current liabilities
refer to those obligations which can be payable within a period of one week. In short,
working capital is that amount of funds which is needed in day today’s business
operations. In other words, it is like circulating money changing from cash to inventories
and from inventories to receivables and again converted into cash.
The activity level of an enterprise expressed as capacity utilization, needs to be well spelt out
in the business plan or project report. However, the enterprise sometimes fails to achieve the
targeted level of capacity due to various business vicissitudes like unforeseen shortage of raw
material, unexpected disruption in power supply, inability to penetrate the market
mechanism, etc. Then, a question arises to what extent and enterprise should continue its
production to meet all its obligations/liabilities. ‘Break-even analysis’ (BEP) gives an answer
to it. In brief, break-even analysis indicates the level of production at which there is neither
profit nor loss in the enterprise. This level of production is, accordingly, called ‘break-even
level’.
3. Market Analysis:
Before the production actually starts, the entrepreneur needs to anticipate the possible market
for the product. He/she has to anticipate who will be the possible customers for his product
and where and when his product will be sold. There is a trite saying in this regard: “The
manufacturer of an iron nails must know who will buy his iron nails.”
This is because production has no value for the producer unless it is sold. It is said that if the
proof of pudding lies in eating, the proof of all production lies in marketing/ consumptio. In
fact, the potential of the market constitutes the determinant of probable rewards from
entrepreneurial career.
Thus, knowing the anticipated market for the product to be produced becomes an important
element in every business plan. The various methods used to anticipate the potential market,
what is named in ‘Managerial Economics’ as ‘demand forecasting’, range from the naive to
sophisticated ones.
The commonly used methods to estimate the demand for a product are as follows:
1. Opinion Polling Method:
In this method, the opinions of the ultimate users, i.e. customers of the product are estimated.
This may be attempted with the help of either a complete survey of all customers (called,
complete enumeration) or by selecting a few consuming units out of the relevant population
(called, sample survey).
(a) Complete Enumeration Survey
(b) Sample Survey
(c) Sales Experience Method
(d) Vicarious Method
2. Life Cycle Segmentation Analysis:
It is well established that like a man, every product has its own life span. In practice, a
product sells slowly in the beginning. Backed by sales promotion strategies over period, its
sales pick up. In the due course of time, the peak sale is reached. After that point, the sales
begin to decline. After, some time, the product loses its demand and dies. This is natural
death of a product. Thus, every product passes through its ‘life cycle’. This is precisely the
reason why firms go for new products one after another to keep themselves alive.
4. Technical Feasibility:
While making project appraisal, the technical feasibility of the project also needs to be taken
into consideration. In the simplest sense, technical feasibility implies to mean the adequacy of
the proposed plant and equipment to produce the product within the prescribed norms. As
regards know-how, it denotes the availability or otherwise of a fund of knowledge to run the
proposed plants and machinery.
It should be ensured whether that know-how is available with the entrepreneur or is to be
procured from elsewhere. In the latter case, arrangement made to procure it should be clearly
checked up. If project requires any collaboration, then, the terms and conditions of the
collaboration should also be spelt out comprehensively and carefully.
In case of foreign technical collaboration, one needs to be aware of the legal provisions in
force from time to time specifying the list of products for which only such collaboration is
allowed under specific terms and conditions. The entrepreneur, therefore, contemplating for
foreign collaboration should check these legal provisions with reference to their projects.
While assessing the technical feasibility of the project, the following inputs covered in the
project should also be taken into consideration:
(i) Availability of land and site.
(ii) Availability of other inputs like water, power, transport, communication facilities.
(iii) Availability of servicing facilities like machine shops, electric repair shop, etc.
(iv) Coping-with anti-pollution law.
(v) Availability of work force as per required skill and arrangements proposed for training-in
plant and outside.
(vi) Availability of required raw material as per quantity and quality.
5. Management Competence:
Management ability or competence plays an important role in making an enterprise a success
or otherwise. Strictly speaking, in the absence of managerial competence, the projects which
are otherwise feasible may fail.
On the contrary, even a poor project may become a successful one with good managerial
ability. Hence, while doing project appraisal, the managerial competence or talent of the
promoter should be taken into consideration.
Research studies report that most of the enterprises fall sick because of lack of managerial
competence or mismanagement. This is more so in case of small-scale enterprises where the
proprietor is all in all, i.e., owner as well as manager. Due to his one-man show, he may be
jack of all but master of none.
 CHAPTER – 4
Institutions Supporting Small
Business Enterprises
Central Level Institutions:

NABARD; SIDBI, NIC, KVIC; SIDO; NSIC Ltd; etc. – State level Institutions – DICs-
SFCSSIDC-Other financial assistance.
CENTRAL LEVEL INSTITUTIONS SUPPORTING ENTREPRENEURS
SMALL SCALE INDUSTRIES BOARD (SSIB) The government of India constituted a
board, namely, Small Scale Industries Board (SSIB) in1954 to advice on development of
small scale industries in the country. The SSIB is also known as central small industries
board. The range of development working small scale industries involves several departments
/ ministries and several organs of the central/state governments. Hence, to facilitate
coordination and inter-institutional linkages, the small scale industries board has been
constituted. It is an apex advisory body constituted to render advice to the government on all
issues pertaining to the development of small-scale industries. The industries minister of the
government of India is the chairman of the SSIB. The SSIB comprises of 50 members
including state industry minister, some members of parliament, and secretaries of various
departments of government of India, financial institutions, public sector undertakings,
industry associations and eminent experts in the field.
NATIONAL SMALL INDUSTRIES CORPORATION (NSIC)
The National Small Industries Corporation (NSIC), an enterprise under the union ministry of
industries was set up in 1955 in New Delhi to promote aid and facilitate the growth of small
scale industries in the country. NSIC offers a package of assistance for the benefit of small–
scale enterprises.
1. Established in 1955 by GOI with the main objectives to promote, aid and foster the
growth of SSIs in the country
2. Single point registration: Registration under this scheme for participating in
government and public sector undertaking tenders.
3. Over four decades of transition and growth in the SSI sector, NSIC has provided
strength through a progressive attitude of modernization, up gradation of technology, quality
consciousness, strengthening linkages with large and medium-scale enterprise and boosting
exports of products from small enterprises
4. Information service: NSIC continuously gets updated with the latest specific
information on business leads, technology and policy issues.
5. Raw material assistance: NSIC fulfils raw material requirements of small-scale
industries and provides raw material on convenient and flexible terms.
6. Meeting credit needs of SSI: NSIC facilitate sanctions of term loan and working
capital credit limit of small enterprise from banks.
7. Performance and credit rating: NSIC gives credit rating by international agencies
subsidized for small enterprises up to 75% to get better credit terms from banks and export
orders from foreign buyers.
Main services provided by NSIC are:
• Technology Transfer Centre (TTC).
• Government Store Purchase Program.
• Assistance for Procurement of Raw Material.
• Financial Assistance Scheme.
• Machinery and Equipment (Hire Purchase / Lease scheme)
SMALL INDUSTRIES DEVELOPMENT ORGANIZATION (SIDO): SIDO is created
for development of various small scale units in different areas. SIDO is a subordinate office
of department of SSI and ARI. It is a nodal agency for identifying the needs of SSI units
coordinating and monitoring the policies and programmes for promotionof the small
industries. It undertakes various programmes of training, consultancy, evaluationfor needs of
SSI and development of industrial estates. All these functions are taken care with27 offices,
31 SISI (Small Industries Service Institute) 31 extension centres of SISI and7 centres related
to production and process development. The activities of SIDO are divided into three
categories as follows
Coordination activities of SIDO:
• To coordinate various programmes and policies of various state governments
pertaining to small industries.
• To maintain relation with central industrial ministry, planning commission, state level
industries ministry and financial institutions
• Implement and coordinate in the development of industrial estates.
Industrial development activities of SIDO:
• Develop import substitutions for components and products based on the data available
for various volume-wise and value-wise imports.
• To give essential support and guidance for the development of ancillary units.
• To provide guidance to SSI units in terms of costing market competition and to
encourage them to participate in the government stores and purchase tenders.
• To recommend the Central government for reserving certain items to produce at SSI
level only.
Management activities of SIDO:
• To provide training, development and consultancy services to SSI to develop their
competitive strength.
• To provide marketing assistance to various SSI units.
• To assist SSI units in selection of plant and machinery, location, layout design and
appropriate process.
• To help them get updated in various information related to the small scale industries
activities.
Khadi and Village Industries Commission (KVIC):
• It is charged with planning, promotion, organization and implementation of the
program for the development of Khadi and other village industries in the rural areas in
coordination with other agencies engaged in rural development
• KVIC is entrusted with the task of providing financial assistance to institutions or
persons engaged in the development and operation of Khadi and village industries and
guide them through supply of designs, prototypes and other technical information.

• KVIC’s functions also comprise building up a reserve of raw materials and

implements for supply to producers, creation of common service facilities for
processing of raw materials and provision of marketing of KVIC products.
National Science and Technology Entrepreneurship Development Board (NSTEDB):
Established in 1982 by GOI, is an institutional mechanism to help promote knowledge-driven
and technology-intensive enterprises.

Major objectives are:

1.Promote and develop high-end entrepreneurship for S&T manpower as well as self-
employment by utilizing S&T infrastructure and by using S&T methods facilitate and
conduct various informational services relating to promotion of entrepreneurship.
2. Network agencies of support system, academic institutions and R&D organizations to
foster self-employment using S&T with special focus on backward areas - act as a policy
advisory body with regard to entrepreneurship.
National Productivity Council (NPC):
Autonomous institution functioning under the overall supervision of the Ministry of Industry,
GOI.
1. Primary objective is to act as a catalyst in enhancing the productivity of all sectors of the
economy, including industry and agriculture.
2. Administered by a tripartite Governing Council (GC) which has equal representation from
the government, industry and trade unions
3. Active in the field of consultancy and training and has a number of specialized divisions to
provide tailor-made solutions to agriculture and industry. These divisions, manned by
trained consultants, deal with issues related to industrial engineering, plant engineering,
energy management, HRD, informal sector, agriculture and so on
4. NPC is a member of the Asian Productivity Organization (APO), Tokyo, an umbrella body
of all productivity councils in Asian region.
5. To channelize expertise of NPC to small-scale and informal sector, SIDBI has tied-up with
NPC for enhancing technology in small units
National Institute for Small Industry Extension and Training (NISIET)
1. Set up in early 1950s, NISIET acts an important resource and information centre for
small units and undertakes research and consultancy for small industry development.
2. An autonomous arm of the Ministry of Small Scale Industries, the institute achieves
its objectives through training, consultancy, research and education, to extension and
information services.
3. In 1984, UNIDO has recognized NISIET as an institute of meritorious performance
under its Centre of Excellence Scheme to extend aid.
National Institute for Entrepreneurship and Small Business Development (NIESBUD)
NIESBUD is an autonomous body under the administrative control of the Office of the
DC(SSI). NIESBUD established in 1983 by the Ministry of Industry, GOI, as an apex body
for coordinating and overseeing the activities of various institutions/agencies engaged in
Entrepreneurship Development particularly in the area of small industry and business. The
policy, direction and guidance to the institute is provided by its Governing Council whose
chairman is the Minister of SSI. Besides conducting national and international training
programs, the institute undertakes research studies, consultancy assignments, development of
training aids, etc. Entrepreneurship development institute of India.
The Entrepreneurship Development Institute of India (EDI)
An autonomous and not-for-profit Institute, set up in 1983, is sponsored by apex financial
institutions - the IDBI Bank Ltd., IFCI Ltd. Commission appointed the EDI as anexpert
agency to develop curriculum on Entrepreneurship.
Objectives:
• Inculcate the spirit of entrepreneurship among youth.
• Promote micro enterprise at rural level.
• Participate in institutional.
• The Augment supply of trainers motivators for entrepreneurship and development.
• Contribute to the creation and dissemination of new knowledge and insight into
entrepreneurial theory and practice through research.
• Contribute to dispersal of business ownership and thus expand social base of the
Indian entrepreneurial class.
• Improve managerial capabilities of small scale industries.
• Generate multiplier effect on opportunities for self-employment.
• Augment the supply of trained entrepreneurs through training
National Bank for Agriculture and Rural Development (NABARD)
National Bank for Agriculture and Rural Development (NABARD) is an apex development
bank in India having headquarters based in Mumbai (Maharashtra) and other branches are
allover the country. It was established on 12 July 1982 by a special act by the parliament and
its main focus was to uplift rural India by increasing the credit flow for elevation of
agriculture &rural non farm sector and completed its 25 years on 12 July 2007 It has been
accredited with "matters concerning policy, planning and operations in the field of credit for
agriculture and other economic activities in rural areas in India". RBI sold its stake in
NABARD to the Government of India, which now holds 99% stake. Role NABARD is the
apex institution in the country which looks after the development of the cottage industry,
small industry and village industry, and other rural industries. NABARD also reaches out to
allied economies and supports and promotes integrated development. And to help NABARD
discharge its duty, it has been given certain roles as follows:
1. Serves as an apex financing agency for the institutions providing investment and
production credit for promoting the various developmental activities in rural areas
2. Takes measures towards institution building for improving absorptive capacity of the credit
delivery system, including monitoring.
3. Co-ordinates the rural financing activities of all institutions engaged in developmental
work at the field level and maintains liaison with Government of India, State Governments,
Reserve Bank of India (RBI) and other national level institutions concerned with policy
formulation
4. Undertakes monitoring and evaluation of projects refinanced by it.
5. NABARD refinances the financial institutions which finances the rural sector.
6. The institutions which help the rural economy, NABARD helps develop.
7. NABARD also keeps a check on its client institutes. 8. It regulates the institution which
provides financial help to the rural economy.
9. It provides training facilities to the institutions working the field of rural upliftment.
10. It regulates the cooperative banks and the RRB’s.
NABARDs refinance is available to State Co-operative Agriculture and Rural Development
Banks (SCARDBs), State Co-operative Banks (SCBs), Regional Rural Banks (RRBs),
Commercial Banks (CBs) and other financial institutions approved by RBI. While the
ultimate beneficiaries of investment credit can be individuals, partnership concerns,
companies, State-owned corporations or co-operative societies, production credit is generally
given to individuals. NABARD has its head office at Mumbai, India. NABARD operates
throughout the country through its 28 Regional Offices and one Sub-office, located in the
capitals of all the states/union territories. Each Regional Office [RO] has a Chief General
Manager [CGMs] as its head, and the Head office has several Top executives like the
Executive Directors[ED], Managing Directors [MD], and the Chairperson. It has 336 District
Offices across the country, one Sub-office at Port Blair and one special cell at Srinagar. It
also has 6 training establishments. NABARD is also known for its SHG Bank Linkage
Programme which encourages Indias banks to lend to self-help groups (SHGs). Because
SHGs are composed mainly of poor women, this has evolved into an important Indian tool
for microfinance. As of March 2006 2.2 million SHGs representing 33 million members had
to been linked to credit through this programme. NABARD also has a portfolio of Natural
Resource Management Programmes involving diverse fields like Watershed Development,
Tribal Development and Farm Innovation through dedicated funds set up for the purpose.
Industrial development bank of India :
1. IDBI is an Indian financial service company head quartered Mumbai, India. RBI
categorised IDBI as an "other public sector bank". It was established in 1964by an Act of
Parliament to provide credit and other facilities for the development of the fledgling Indian
industry.
[2] It is currently 10th largest development bank in the world in terms of reach with 1514
ATMs, 923 branches including one overseas branch at DIFC, Dubai and 621 centers
including two overseas centres at Singapore & Beijing.
[3] Some of the institutions built by IDBI are the Securities and Exchange Board of India
(SEBI), National Stock Exchange of India (NSE), the National Securities Depository Limited
(NSDL), the Stock Holding Corporation of India Limited (SHCIL), the Credit Analysis &
Research Ltd, the Exim Bank (India) (Exim Bank),the Small Industries Development Bank of
India(SIDBI), the Entrepreneurship Development Institute of India, and IDBI BANK, which
is owned by the Indian Government. IDBI Bank is on apart with nationalized banks and the
SBI Group as far as government ownership is concerned. It is one among the 26 commercial
banks owned by the Government of India. The Bank has an aggregate balance sheet size of
Rs. 2, 53,378 crore as on March 31, 2011. IDBI Banks operations during the financial year
ended March 31.Role of IDBI In order to increase its customer base; the Industrial
Development Bank of India offers a number of customized and innovative banking services.
The services are meant to offer cent percent satisfaction to the customers. Some of the well
known services offered by the bank are:

Wholesale Banking services: The wholesale banking services form a major part of the banking
services of the bank. The services that are offered under the wholesale division are: Cash
Management Transactional services Finance of working capital Agro based business transactions
Trade services the wholesale banking services are an important source of income in a number of
infrastructure projects such as power, transport, telecom, railways, roadways, and logistics and
Retail Banking Services: The Industrial Development Bank of India is also a leader in the retail
banking services. Eligible Borrowers Entrepreneurs setting up new projects in MSE / tiny sector,
new promoters acquiring unencumbered fixed assets of existing MSE concerns from PLIs and
also existing well run units undertaking modernization /technology up gradation and potentially
viable sick units undertaking rehabilitation scheme Norms/Scheme operated through SFCs / twin
function IDCs / scheduled commercial banks / eligible state co-operative banks / scheduled urban
cooperative banks Loan Limit - Not to exceed Rs.200.00 lakh
STATE LEVEL INSTITUTIONS
Directorate of Industries (DIs)
At the State level, the Commissioner/ Director of Industries implements policies for the
promotion and development of small-scale, cottage, medium and large scale industries. The
Central policies for the SSI sector serve as guidelines but each State evolves its own policy
and package of incentives. The Commissioner/ Director of Industries in all the States/UTs,
oversee the activities of field offices, that is, the District Industries Centers (DICs) at the
district level. District Industries Centers (DICs) : In order to extend promotion of small-scale
and cottage industries beyond big cities and state capitals to district headquarters, DIC
program was initiated in May, 1978, as a centrally sponsored scheme. DIC was established
with the aim ofgenerating greater employment opportunities especially in rural and backward
areas in the country. At present DICs operate under respective Sate budgetary provisions.
DICs extend services of the following nature –
(i) Economic investigation of local resources
(ii) supply of machinery and equipment
(iii) Provision of raw materials
(iv) Arrangement of credit facilities
(v) Marketing
(vi) Quality inputs
(vii) (vii) Consultancy.
State Financial Corporation’s (SFCs) :
Main objectives are to finance and promote small and medium enterprises in their respective
states for achieving balanced regional growth, catalyze investment, generate employment and
widen ownership base of industry. Financial assistance is provided by way of term loans,
direct subscription to equity/debentures, guarantees, discounting of bills of exchange and seed
capital assistance. SFCs operate a number of schemes of refinance of IDBI and SIDBI and
also extend equity type assistance. SFCs have tailor-made schemes for artisans and special
target groups such as SC/ST, women, ex-servicemen, physically challenged and also provide
financial assistance for small road transport operators, hotels, tourism-related activities,
hospitals and so on. Under Single Window Scheme of SIDBI, SFCs have also been extending
working capital along with term loans to mitigate the difficulties faced by SSIs in obtaining
working capital limits on time.
State Industrial Development / Investment Corporation (SIDC/SIIC):
Set up under the Companies Act, 1956, as wholly owned undertakings of the State
governments, act as catalysts in respective states. SIDC helps in developing land providing
developed plots together with facilities like roads, power, water supply, drainage and other
amenities. They also extend assistance to small-scale sector by way of term loans,
subscription to equity and promotional services. 11 out of 28 SIDCs in the country also
function as SFCs and are termed as Twin-function IDCs. State Small Industrial Development
Corporations (SSIDC):
Established under Companies Act, 1956, as State government undertaking, caters to small,
tiny and village industries in respective states. Being operationally flexible undertakes the
activities like
(i) procure and distribution of scarce raw materials,
(ii) supply of machinery to SSI units on hire-purchase basis,
(iii) product marketing assistance,
(iv) construction of industrial estates, allied infrastructure facilities and their maintenance
(v) extending seed capital assistance on behalf of State government and (vi) providing
management assistance to production units.
Small scale industries development bank of India:
The SIDBI was established in 1990 as the apex refinance bank. The SIDBI is operating
different programmes and schemes through 5Regional Offices and 33 Branch Offices. The
financial assistance of SIDBI to the small scale sector is channelized through the two routes –
direct and indirect.
1. Indirect assistance
a) SIDBI’s financial assistance to small sector is primarily channelized through the existing
credit delivery system, which consists of state level institutions, rural and commercial banks.
b) SIDBI provides refinance to and discounts bills of Primarily Lending Institutions (PLI). c)
The assistance is available for
• Marketing of SSI product
• Setting up of new ventures
• Availability of working capital
• Expansion
• Modernization
• Human resource development
 • Diversification of existing units for all activities
2. Direct assistance
a) The loans are available for new ventures, diversification technology up gradation,
modernization and expansion of well-run small scale enterprises. Assistance is also
available for private sector.
b) Small scale sector is eligible for maximum debt-equity ratio of 3:1
c) Foreign currency loan for import of equipment are also available to export oriented small
scale enterprises.
d) SIDBI also provide venture capital assistance to the entrepreneurs for their innovative
ventures if they have a sound management team, long term competitive advantage and a
potential for above average profitability leading to attractive return on investment.
New initiatives of SIDBI are:
a) Two Subsidiaries viz. SIDBI Venture Capital Limited and SIDBI Trustee Company
Limited formed to oversee Venture Capital.
b) Technology Bureau for Small Enterprise formed to oversee Technology Transfer,
Matchmaking Services, Finance Syndication and facilitating Joint Ventures.
c) SIDBI Foundation for Micro Credit has been launched to provide financial assistance to
the poor and to meet emerging needs of the micro finance sector especially in rural areas.
 CHAPTER- 5
Government Policy and Taxation
Benefits
Government Policy for SSIs – tax incentives and concessions – Non-tax concessions –
Rehabilitation and Investment Allowances.
5.1. Government Policy for SSIs:
Some of the Government Policies for development and promotion of Small-Scale Industries
in India are: 1. Industrial Policy Resolution (IPR) 1948, 2. Industrial Policy Resolution (IPR)
1956, 3. Industrial Policy Resolution (IPR) 1977, 4. Industrial Policy Resolution (IPR) 1980
and 5. Industrial Policy Resolution (IPR) 1990.
Since Independence, India has several Industrial Policies to her credit. So much so that
Lawrence A. Veit tempted to say that “if India has as much industry as it has industrial
policy, it would be a far well-to-do nation.” With this background in view, in what follows is
a review of India’s Industrial Policies for the development and promotion of small-scale
enterprises in the country.
1. Industrial Policy Resolution (IPR) 1948:
The IPR, 1948 for the first time, accepted the importance of small-scale industries in the
overall industrial development of the country. It was well realized that small-scale industries
are particularly suited for the utilization of local resources and for creation of employment
opportunities.
However, they have to face acute problems of raw materials, capital, skilled labour,
marketing, etc. since a long period of time. Therefore, emphasis was laid in the IPR, 1948
that these problems of small-scale enterprises should be solved by the Central Government
with the cooperation of the State Governments. In nutshell, the main thrust of IPR 1948, as
far as small-scale enterprises were concerned, was ‘protection.’
2. Industrial Policy Resolution (IPR) 1956:
The main contribution of the IPR 1948 was that it set in the nature and pattern of
industrial development in the country. The post-IPR 1948 period was marked by
significant developments taken place in the country. 
Industries Act, 1951 was also introduced to regulate and control industries in the
country.
The parliament had also accepted ‘the socialist pattern of society’ as the basic aim of
social and economic policy during this period. It was this background that the
declaration of a new industrial policy resolution seemed essential Besides, the Small-
Scale Industries Board (SSIB) constituted a working group in 1959 to examine and formulate
a development plan for small-scale industries during the, Third Five Year Plan, 1961-66. In
the Third Five Year Plan period, specific developmental projects like ‘Rural Industries
Projects’ and ‘Industrial Estates Projects’ were started to strengthen the small-scale sector in
the country. Thus, to the earlier emphasis of ‘protection’ was added
‘development.’ The IPR 1956 for small-scale industries aimed at “Protection plus
Development.” In a way, the IPR 1956 initiated the modem SSI in India.
3. Industrial Policy Resolution (IPR) 1977:
During the two decades after the IPR 1956, the economy witnessed lopsided industrial
development skewed in favour of large and medium sector, on the one hand, and increase in
unemployment, on the other. This situation led to a renewed emphasis on industrial policy.
This gave emergence to IPR 1977.
The Policy Statement categorically mentioned:
“The emphasis on industrial policy so far has been mainly on large industries,
neglecting cottage industries completely, relegating small industries to a minor role.
The main thrust of the new industrial policy will be on effective promotion of cottage
and small-scale industries widely dispersed in rural areas and small towns. It is the
policy of the Government that whatever can be produced by small and cottage
industries must only be so produced. The IPR 1977 accordingly classified small
sector into three broad categories:
Cottage and Household Industries which provide self-employment on a large scale.
1. Tiny sector incorporating investment in industrial units in plant and machinery up to Rs. 1
lakh and situated in towns with a population of less than 50,000 according to 1971 Census.
2. Small-scale industries comprising of industrial units with an investment of upto Rs. 10
lakhs and in case of ancillary units with an investment up to Rs. 15 lakhs.
The measures suggested for the promotion of small-scale and cottage industries included:
(i) Reservation of 504 items for exclusive production in small-scale sector.
(ii) Proposal to set up in each district an agency called ‘District Industry Centre’ (DIC) to
serve as a focal point of development for small-scale and cottage industries. The scheme
of DIC was introduced in May 1978. The main objective of setting up DICs was to
promote under a single roof all the services and support required by small and village
entrepreneurs. What follows from above is that to the earlier thrust of protection (IPR
 1948) and development (IPR 1956), the IPR 1977 added ‘promotion’. As per this
resolution, the small sector was, thus, to be ‘protected, developed, and promoted.’
4. Industrial Policy Resolution (IPR) 1980:
The Government of India adopted a new Industrial Policy Resolution (IPR) on July 23, 1980.
The main objective of IPR 1980 was defined as facilitating an increase in industrial
production through optimum utilization of installed capacity and expansion of industries.
As to the small sector, the resolution envisaged:
(i) Increase in investment ceilings from Rs. 1 lakh to Rs. 2 lakhs in case of tiny units,
from Rs. 10 lakhs to Rs. 20 lakhs in case of small-scale units and from Rs. 15 lakhs to Rs. 25
lakhs in case of ancillaries.
(ii) Introduction of the concept of nucleus plants to replace the earlier scheme of the
District Industry Centres in each industrially backward district to promote the maximum
small-scale industries there.
(iii) Promotion of village and rural industries to generate economic viability in the villages
well compatible with the environment.
Thus, the IPR 1980 reimphasised the spirit of the IPR 1956. The small-scale sector still
remained the best sector for generating wage and self-employment based opportunities in the
country.

5. Industrial Policy Resolution (IPR) 1990:

The IPR 1990 was announced during June 1990. As to the small-scale sector, the resolution
continued to give increasing importance to small-scale enterprises to serve the objective of
employment generation.
The important elements included in the resolution to boost the development of small-scale
sector were as follows:
(i) The investment ceiling in plant and machinery for small-scale industries (fixed in 1985)
was raised from Rs. 35 lakhs to Rs. 60 lakhs and correspondingly, for ancillary units
from Rs. 45 lakhs to Rs. 75 lakhs.
(ii) Investment ceiling for tiny units had been increased from Rs. 2 lakhs to Rs. 5 lakhs
provided the unit is located in an area having a population of 50,000 as per 1981 Census.
(iii) As many as 836 items were reserved for exclusive manufacture in small- scale sector.
(iv) A new scheme of Central Investment Subsidy exclusively for small-scale sector in rural
and backward areas capable of generating more employment at lower cost of capital had
been mooted and implemented.
(iv) With a view, to improve the competitiveness of the products manufactured in the
smallscale sector; programmes of technology up gradation will be implemented under the
umbrella of an apex Technology Development Centre in Small Industries Development
Organisation (SIDO).
(v) To ensure both adequate and timely flow of credit facilities for the small- scale
industries, a new apex bank known as ‘Small Industries Development Bank of India (SIDBI)’
was established in 1990.
(vi) Greater emphasis on training of women and youth under Entrepreneurship
Development Programme (EDP) and to establish a special cell in SIDO for this purpose.
(vii) Implementation of delicencing of all new units with investment of Rs. 25 crores in
fixed assets in non-backward areas and Rs. 75 crores in centrally notified backward areas.
Similarly, delicensing shall be implemented in the case of 100% Export Oriented Units
(EOU) set up in Export Processing Zones (EPZ) up to an investment ceiling of Rs. 75 lakhs.

5.2. Tax incentives to SSIs:

Some of the tax benefits available to Small-Scale Industries in India are as follows:
Tax Holiday:
Under section 80J of the Income Tax Act 1961, new industrial undertakings, including
smallscale industries, are exempted from the payment of income- tax on their profits subject
to a maximum of 6% per annum of their capital employed. This exemption in tax is allowed
for a period of five years from the commencement of production.
Depreciation:
Under Section 32 of the Income Tax Act, 1961, a small-scale industry is entitled to a
deduction on depreciation account on block of assets at the prescribed rate. Small enterprise
is allowed subject to a maximum of Rs. 20 lakh deduction for depreciation on plant and
machinery on the diminishing balance method.
In case of an asset acquired before the accounting period, depreciation is calculated on its
written down value. For plant and machinery that are used in manufacturing in double or
triple shift, an additional allowance called ‘Extra Shift Allowance’ is also available.
Rehabilitation Allowance:
A rehabilitation allowance is granted to small-scale industries under Section 33-B of the
Income Tax Act, 1961 whose business is discontinued on account of the following reasons:
1. Flood, typhoon, hurricane, cyclone, earthquake, or other natural upheavals;
2. Riot or civil disturbance;
3. Accidental fire or explosion; and
4. Action by an enemy or action taken in combating an enemy.
The rehabilitation allowance should be used for business purposes within three years of unit’s
re-establishment, reconstruction, or revival .The rehabilitation allowance is allowed to the
unit equivalent of 60 per cent of the amount of the deduction allowable to the unit.
Investment Allowance:
The Investment allowance was introduced way back in 1976 to replace the initial depreciation
allowance. The investment allowance under Section 31 A of the Income Tax Act, 1961 is
allowed at the rate of 25 per cent of the cost of acquisition of new plant or machinery
installed.
Although the investment allowance has been made available for the articles or things except
certain items of low priority, yet as per the Eleventh Schedule to the Income Tax Act 1961, a
special dispensation has been provided for the plant and machinery installed in small-scale
industries. In comparison with other industries, small-scale industries are at an advantage in
claiming a deduction of investment allowance. A small-scale industry can avail of investment
allowance provided it has put to use machinery or plant either in the year of installation or in
the immediate following year failing which the benefit will be forfeited.
Expenditure on Scientific Research:
Under Section 35 of the Income Tax Act, 1961, the following deductions in respect of
expenditure on scientific research are allowed:
1. Any revenue expenditure incurred on scientific research related to the business of the
assessee in the previous year.
2. Any sum paid to a scientific research association or a university, college, institution or
to a public company which has its object, the undertaking of a scientific research.
3. Any capital expenditure incurred on scientific research related to the business of the
assessee subject to the provision of Section 35(2) of the Income Tax Act, 1961.
In case of any unabsorbed capital expenditure incurred on scientific research, the provision of
the Income Tax Act allow to carry it forward for adjustment against the profits earned by the
business in the subsequent years for an indefinite time period.
Amortization of Certain Preliminary Expenses:
The Indian companies and resident persons, under Section 35D of the Income Tax Act 1961,
are allowed to write off the preliminary and developmental expenses incurred by them in
connection with the setting up of a new industrial unit or expansion of an existing industrial
unit.
A small-scale unit established in a backward area, under Section 80-HH, is allowed a
deduction of 20 per cent on its profits and gains provided the unit satisfies the following
conditions:
a. The unit began its production after 31st December 1970 in any backward area of the
country;
b. It is a newly established unit in a backward area. It is neither split nor reconstituted
out of a business already in existence in any backward area;
c. It has not been formed by the transfer to a new business plant or machinery which was
previously used for any purpose in any backward area; and
d. It employs 10 or more workers in a manufacturing process with power or 20 or more
workers without power.
Tax Concession to Small-Scale Industries in Rural Areas:
The Finance (No.2) Act of 1977 inserted a new Section 80-HHA in the Income Tax Act,
1961. The tax payers, under this Section 80-HHA, are entitled to a deduction of 20 % of the
profits and gains derived by running small-scale industries in the rural areas.
The deduction is allowed for a period of 10 years from the year of commencement of
manufacturing activity after 30th September 1977. For this purpose, the expression rural area
means any area as defined under the Explanation to Section 35 CC (I) of the Income Tax Act,
1961. However, this tax deduction benefit is not allowed to the small-scale units engaged in
mining activity.
Tax Concessions to Small-Scale Industries in Backward Areas:
The Planning Commission of India, in 1970-71, declared 247 districts out of 435 districts as
backward areas with a view to provide them special incentives and concessions to establish
industries in these backward areas. The newly established small-scale industries in these areas
specified in the Eighth Schedule to the Income Tax Act, 1961 are entitled to a deduction of
20% of their profits and gains from their gross total income.
This deduction is allowed for a period of 10 years beginning with the year of commencement
of manufacture or production. However, if a small-scale industry has already been established
in a non-backward area and later shifted to backward area, the unit will be allowed this
deduction on the profits earned from the undertaking after shifting in the backward area for a
period of 10 years. A small-scale industry established in backward area but engaged in
mining activity is not entitled to such deduction benefit.
Expenditure on Acquisition of Patents and Copyrights:
Under Section 35-A of the Income Tax Act, 1961, any expenditure of capital nature incurred
in acquiring a patent and copyright by a small-scale industry is deductible from its income.
But the expenditure should be incurred after 28th February 1966. The expenditure can be
deducted in 14 equal installments beginning with the previous year in which the expenditure
was incurred in acquiring patents and copyrights for the unit.
Profits from Business of Publication of Books:
Under Section 80-1A of the Income Tax Act, 1961 which has replaced Section 80-1 w.e.f. the
assessment year 1991-92, 20% of the profits earned by a small- scale industry from the
business of publication of books is deductible from its gross total income. The deduction
benefit is available for total period of five years beginning with the assessment year 1992-93.
In addition, deductions are also available in respect of:
1. Royalties from any company in India (Under Section 80 M)
2. Royalties from any certain foreign companies (Under Section 800)
3. Inter-corporate Dividends (Under Section 80 M)
4. Income of Co-operative Societies (Under Section SOP)
5. Carry forward and set -off business losses (Under Section 72)

5.3. Non-tax concessions:

Small Scale Industries play a very vital role in the national economy. They help in generating
employment with minimum possible investment and play a very vital role in promoting
exports. Therefore, the Government has announced various schemes and policies for the
promotion of Small Scale Industries to ensure that control over production is widely
distributed. As per the present definition, an industry having investment of upto Rs. 1 crore in
plant and machinery is defined as Small Scale Industry.
Finance to SSI
The advances to SSI are considered as Priority Sector Advances by banks. As per RBI
guidelines, 40 % of the advances of nationalised bank should be to Priority Sector. Thus SSI
Units are given priority in bank finance. Further, RBI has announced that collateral security
will not be insisted for loans by banks up to Rs. 5 Lakhs.
Collateral Free Loans
Availability of bank credit without the hassles of collaterals / third party guarantees would be
a major source of support to the first generation entrepreneurs to realise their dream of setting
up a unit of their own Micro and Small Enterprise (MSE). Keeping this objective in view,
Ministry of Micro, Small & Medium Enterprises (MSME), Government of India launched
Credit Guarantee Scheme (CGS) so as to strengthen credit delivery system and facilitate flow
of credit to the MSE sector.
Any collateral / third party guarantee free credit facility (both fund as well as non fund based)
extended by eligible institutions, to new as well as existing Micro and Small Enterprise,
including Service Enterprises, with a maximum credit cap of Rs.100 lakh (Rupees Hundred
lakh only) are eligible to be covered. The guarantee cover available under the scheme is to the
extent of 75% / 80% of the sanctioned amount of the credit facility, with a maximum
guarantee cap of Rs.62.50 lakh / Rs. 65 lakh. The extent of guarantee cover is 85% for micro
enterprises for credit up to Rs.5 lakh
Equity Support
Under National Equity Fund Scheme equity support is available to entrepreneurs for setting
up new projects in tiny/small scale sector, for undertaking expansion, modernisation,
technology upgradation and diversification by existing tiny, SSI and service enterprises and
for rehabilitation of viable sick units in the SSI sector which fulfill the specified eligibility
criteria. The scope of this scheme was widened in 2000-01 raising the limit of loan from Rs.
6.25 lakhs to Rs. 10 lakhs and project cost limit from Rs. 25 lakhs to Rs. 50 lakhs.
Assistance for Technology Development
SIDBI has set up Technology Development & Modernisation Fund (TDMF) scheme for
direct assistance of small sale industries to encourage existing industrial units in the sector, to
modernise their production facilities and adopt improved and updated technology so as to
strengthen their export capabilities. Assistance under the scheme is available for meeting the
expenditure on purchase of capital equipment acquisition of technical know-how, upgradation
of process technology and products with thrust on quality improvement, improvement in
packaging and cost of TQM and acquisition of ISO-9000 series certification.
Interest Rate Concession
Many nationalized banks have special concessional rates for SME. Some banks even offer
finance at the banks Prime Lending Rate (PLR) for advances below Rs. 2 Lakhs.
Price preference:
The SSI units are given price preference up to a maximum of 15 per cent in respect of certain
items purchased both from small-scale and large-scale units.
Supply of raw materials:
In order to ensure regular supply of raw materials, imported components and equipment’s, the
Government gives priority allocation to the small-scale sector as compared to the largescale
sector. Further, the Government has liberalised the import policy and streamlined the
distribution of scarce raw materials.
Excise duty:
In respect of SSI units excise duty concessions are granted to both registered and unregistered
units on a graded scale depending upon their production value. Full exemption is granted up
to a production value of Rs.30 lakhs in a year and 75 % of normal duty is levied for
production value exceeding Rs.30 lakhs but not exceeding Rs.75 lakhs. If the production
value exceeds Rs.75 lakhs, normal rate of duty will be levied.
Machinery on hire purchase basis:
The National Small Industries Corporation (NSIC) arranges supply of machinery on hire
purchase basis to SSI units, including ancillaries located in backward areas which qualify for
investment subsidy. The rate of interest charged in respect of technically qualified persons
and entrepreneurs coming from backward areas are less than the amount charged to others.
The earnest money payable by technically qualified persons and entrepreneurs from
backward areas is 10% as against 15% in other cases.
Training facilities:
The Entrepreneurship Development Institute of India, financial institutions, commercial
banks, technical consultancy organisations, and NSIC provide training to existing and
potential entrepreneurs.

Marketing assistance:
The National Small Industries Corporation (NSIC), the Small Industries Development
Organisation (SIDO) and the various Export Promotion Councils help SSI units in marketing
their products in the domestic as well as foreign markets. The SIDO conducts training
programmes on export marketing and organises meetings and seminars on export promotion.
District Industries Centres (DICs):
The 1977 Industrial Policy Statement introduced the concept of DICs. Accordingly a DIC is
set up in each district. The DIC provides and arranges a package of assistance and facilities
for credit guidance, supply of raw materials, marketing etc..
5.4. Rehabilitation and Investment Allowances:
The Rehabilitation of Sick Units Scheme is an attempt to help revive sick SSI units before
they become irrecoverable. This scheme provides timely loans that can help a sick unit meet
its payment obligations and enables banks to take action at an early stage for revival of these
units.
Benefits of sick industrial units:
A Sick Industrial Unit benefits from this scheme in the following ways:
• The scheme provides term loan for purchase of fixed assets and loan for working
capital* through a single agency. (The total working capital requirement of such units
is inclusive of all fund-based facilities. This has to be taken into account while
determining the working capital facility that is eligible for refinance.)
• No interest on the interest amount for up to three years from the date of
commencement of implementation of the rehabilitation programme.
• Reduction in rate of interest in term loans up to 3% in the case of tiny/decentralised
sector units and by not more than 2% for other SSI units.
• Principal dues may be treated as irregular to the extent of its drawing power. This
amount may be funded as Working Capital Term Loan (WCTL) with a repayment
schedule not exceeding 5 years.
• The rate of interest applicable may be 1.50% to 3% points below the prevailing fixed
rate or prime lending rate, wherever applicable, to all sick SSI units including tiny and
decentralised units.
• Cash losses are likely to be incurred in the initial stages of the rehabilitation
programme till the unit reaches the break-even level.
• Interest may be charged on the funded amount at the rates prescribed by SIDBI under
its scheme for rehabilitation assistance.
• Interest on working capital may be charged at 1.5% below the prevailing fixed or
prime lending rate wherever applicable. Additional working capital limits may be
extended at a rate not exceeding the prime lending rate.
• For meeting escalations in capital expenditure to be incurred under the rehabilitation
programme, banks/financial institutions may provide, where considered necessary,
appropriate additional financial assistance up to 15% of the estimated cost of
rehabilitation by way of contingency loan assistance.
• Interest on this contingency assistance may be charged at the concessional rate
allowed for working capital assistance.
• Banks may provide the loan for start-up expenses, while margin money assistance
may either come from SIDBI under its Refinance Scheme for Rehabilitation or should
be provided by State Government where it is operating a Margin Money Scheme.
• Interest on fresh rehabilitation term loan may be charged at a rate 1.5% below the
prevailing fixed or prime lending rate wherever applicable or asby SIDBI / NABARD
where refinance is obtained from it for the purpose.
• Promoter’s contribution towards the rehabilitation package is fixed at a minimum of
10% of the additional long-term requirements under the rehabilitation package in the
case of tiny sector units and at 20% of such requirements for other units. In the case of
units in the decentralized sector, promoter’s contribution may not be insisted upon.
• At least 50% of the above promoters’ contribution should be brought in immediately
and the balance within six months.
• Banks should incorporate a ‘Right of Recompense’ clause in the sanction letter and
other documents to the effect that when such units turn the corner and rehabilitation is
successfully completed, the sacrifices undertaken by the financial institutions and
banks should be recouped from the units out of their future profits/ cash accruals.
1. ENTREPRENEUR’S MOTIVATION
Motivation is one of the assumptions necessary for making various decisions in life, as well
as in economy. It is important at the beginning of conducting some activity, but also later,
during gradual growth and development of a business venture.
Needs are at the basis of everything a person does. They are various, with a different
intensity of influencing people. An individual prioritises among different kinds of needs on
the basis of their strength.
The relations between needs and motives are defined by different authors, therefore it is
necessary to make a difference between these terms. “In order that a need becomes a motive
it is necessary for an individual to become aware of it, to feel the need and that it becomes
the force of certain behaviour” [10], or in [7] that relation is defined through the fact that “a
need becomes a motive when it reaches high enough intensity level. Motive is a need which
causes enough pressure to move a person to take action”, that is, “an inner moving force in a
man which encourages and directs his behaviour. [3]”
Every person is specific in some way, he represents a unique individual different from the
others for those specific characteristics. He has got his way of life, line of thoughts, attitudes
and beliefs, which also means certain life objectives, ideals to fight for and strive for
realisation. On the basis of that it can be concluded that each person is encouraged into
activity by various incentives – everybody has got different sources of motivation, which
are important to establish.
The importance of creating and sustaining motivation, personal and with other employees,
represents an important skill, but also art, challenge that an entrepreneur should respond to.
“Motivation for work is a system of methods, acts and actions for encouragement, direction
and strengthening of certain employee behaviour in the working process with the aim of
achieving favourable work effects”. [3]
One of the biggest problems today is how to provide enough money for a normal life. Many
people start a business in order to solve that problem, to secure enough means to live on, to
satisfy existential needs for themselves as well as their families. Only when the above
mentioned motives have been satisfied does a person start to think about advance and
expansion of the business, the path to business growth and development is open.
The level of work motivation “does not only depend upon the number of motives but also
upon their strength and the rate of the conformity”, as stated in [10].
“Motivation is a process of willful movement and direction of a person’s activities towards
reaching a certain objective.” [10]
Motives differ according to the sex of the person starting a business. The results of a
research [11] on the topic can be seen in the graph below.

Picture 1: The reasons for starting a personal business - multiple answers -; the source – the
report on small and medium-sized enterprises and entrepreneurship 2013, National Agency for
Regional Development (NARD)

On the basis of the research conducted by NARD [11] (the graph above), it can be seen that
the main reasons for starting a business among men are the wish for freedom, that is to lead
his own business (33 %), a recognised business chance in the area of his business (23%) as
well as in a new area of business (21%).
As for the women starting their own business, on the basis of the research mentioned above
[11], the conclusion is that the dominant motive for such a decision is the wish for
independence (30%), the same as among men. The other reasons are unemployment, or
insecure employment (22%), as well as a recognised business chances in the existing (18%)
and a new area of business (18%).
At the beginning of a business venture an entrepreneur must take into account the benefits
gained by conducting already planned activities.
“The basic benefits an entrepreneur can achieve by working in his small or medium-sized
business are [8]
- providing existential sources of income for himself and the family
- creating conditions for a better quality way of life
- wishes for self-contained business start - making profit.”
There are a lot of motives at the base of the idea for starting a business (picture). On the
basis of the above mentioned, it can be concluded that different motives for starting an
entrepreneurial venture are grouped around two large super motives, and they are:
1. satisfying basic needs of an individual and his close surroundings (family) and
2. developing personal business to make bigger profits at the market.

Picture 2: Some of the most common motives for undertaking entrepreneurial ventures, author

“It is clear that there are a number of reasons why individuals become entrepreneurs: some
escape monotonous and poorly paid jobs, or they do not want to be numbers in somebody’s
company, some escape from incapable and uninterested managers restraining them from
realising their personal ambitions and creativity, some want new and different things
looking for a new career in entrepreneurship by starting their own business etc. It is
interesting that the common distinction among entrepreneurs is the wish for self-
confirmation”. [12]
Of course, motives for starting a certain business can be looked at from a broader point of
view, through satisfying a variety of individual needs, but also through satisfying certain
needs of the society itself. An entrepreneur comes into existence, grows and develops within
a society, and therefore must take care of its welfare-personal needs should be adjusted to
the needs of the wider community.

2. ENTREPRENEURSHIP DEVELOPMENT FACTORS

Dynamic environment as a feature of a modern business surroundings represent a great

challenge for existing as well as new, young businesses. Willingness to follow and foresee
those dynamics represents one of the key features of a successful business venture.
“An old proverb says that a good military leader can be defeated, but he cannot be surprised.
Organizations doing business in changeable conditions of the environment must not let
themselves be surprised”. [8]
Waiting for the things to be solved by themselves can be a very bad move leading an
entrepreneur and his business gradually into a disaster. It is much better to look at the
situation from all sides, then choose and realise an activity which can be either successful or
unsuccessful. Therefore one cannot wait, he should try because without trying and falling
more than once, a man would not have become an entrepreneur. The most important thing is
how to deal with a loss because only the one who can learn something new from that, gain
new experience and keep on trying and working for reaching a certain objective can hope
for a successful business.
Many factors influence the success of an entrepreneurial venture. They are various and can
be found within an entrepreneurial organisation, as well as outside, in an environment where
an entrepreneur belongs. There are different types and intensities of their activities, but they
are also interconnected in a unique whole determining the final outcome of a business.
These are in fact complex elements influencing the entrepreneurial success or eventually
failure, so they can also be seen as business/entrepreneurial success factors. “These factors
can be divided into two basic groups [13]:
1. personal features and entrepreneur’s potential and
2. features and potentials of the external environment.”
 Picture 3: Entrepreneurial success factors, picture data taken from [1]

According to [3], an entrepreneurial process is “a group of activities perceiving business

possibilities and creating organisations (companies – business ventures) for their realisation.
It includes a change of the existing lifestyle of a potential entrepreneur towards an active life
of an entrepreneur – the founder of a new company”. Of course, it is necessary to
understand the main factors which can change the lifestyle we mentioned and as quoted in
[3], they are: “the existence of unrealised ideas and the realisation that there are unsatisfied
needs in the market, as well as important breaks in the life of an entrepreneur.”

Picture 4: Basic factors of an entrepreneurial success, author

In order that an entrepreneurial venture should become a success, needs, wishes and market
demands are very important, primarily those of consumers or service users that an
entrepreneur sees as the market aims (picture 4). Out of many needs we should point out the
profitable ones, and then the ones that an entrepreneur can satisfy according to his financial
assets and other resources, as well as his own needs and motives. A proper evaluation of the
items mentioned is necessary in order to aim at the market chances, but only those that an
entrepreneur can use according to his strengths.
A characteristic of every country is a different business environment, including
competition, legal regulations and many other factors. They can have both positive and
negative effects on conducting and growing of a business, which means that entrepreneurs
work within an environment as a combination of favourable and unfavourable factors.

Picture 5: Market restrictions – multiple answers; Source – A research on conditions, needs

and problems of the small and medium-sized enterprises and entrepreneurs in Serbia, a quantity
field research, National agency for regional development, October 2013.

A large number of factors influence small and medium-sized businesses and entrepreneurs
in a negative way. Some of them which influence entrepreneurs are largely similar, in all
economies, but on the basis of the research by the National agency for regional development
[11] in the territory of the Republic of Serbia, the following factors are typical – the first
three places in limitation factors in the market convincingly take: numerous competition,
low demand and disloyal competition. The results of the research are shown in the picture.

Picture 6: The problems in doing business for small and medium-sized companies in the
territory of the Republic of
Serbia, source - the research on conditions, needs and problems of small and medium-sized
companies and entrepreneurs in Serbia, Quantity field research, National agency for regional
development, October 2013 On the basis of the above mentioned research [11], several basic
problems in doing business for small and mediumsized companies and entrepreneurs in the
Republic of Serbia are specified. They are: regulations, lack of assets, lack of qualified work
force, disagreement with standards, lack of information about the market and lack of
information about technologies. The sector of small and medium-sized companies should have
special attention, primarily in terms of averting certain problems they face. Each problem solved
leads to improvement in this area of business so that every effort can be paid off in the long run.
 Picture 7: Fulfilled expectations from starting a business; source - the research on conditions,
needs and problems of small and medium-sized companies and entrepreneurs in Serbia,
Quantity field research, National agency for regional development, October 2013.

Many people who start their own business will have different opinions about the success of
the business after a certain period of time. On the basis of the research mentioned (picture) it
can be seen the rate of expectations fulfillment of the interviewees in this specific case. The
conclusions should not be drawn easily, it is very important to take all the indicators of
success into account, and to draw the right conclusion based on those. In any case, only an
entrepreneur knows the true reasons and objectives for starting his own business, and
therefore can consider their achievement.
A very important thing in entrepreneurship development in the world as well as here is
appropriate business environment creation in which various types of entrepreneurs could emerge,
survive and develop without obstacles, according to business market laws; The state has an
important part in realisation of the task mentioned, it should help this economy sector
development by various incentives and this type of help is the most important at the very
beginning of doing business. Well-developed and strong small and medium-sized business and
entrepreneurs sector is the best indicator of strength and development of the economy. In that
environment with a strong competition battle and under the influence of a number of factors it can
be seen who is ready to accept the strict conditions of the market at the moment, to remain at the
market and do business with profit – only the best, true entrepreneurs survive in such conditions.

Entrepreneurs, as one of the main growth and development carriers, are very important in every
economy. The role of the state is very important in this area because creating favourable business
environment for small and medium-sized business sector development is extremely important not
only for them as new business starters, but for the state itself.
 RESEARCH DESIGN

Entrepreneurship is important in many ways. On many occasions, researchers have stressed

the importance of entrepreneurship for economic growth. As a result, entrepreneurship is
stimulated and supported by many initiatives in order to increase the number of entrepreneurs
and to increase the success rate of these starting firms. Prior research mentions the drivers
and the barriers for individuals to start a self-employed career. Among the drivers the need
for independency and the opportunities for a higher income gain the upper hand. On the
barrier's side risks and uncertainty prevail. In the group of barriers for starting an enterprise
two aspects are important: the need to find a proper business idea and the need to find
complementary competences in one or more co-founders. This paper proposes a research-by-
design approach tackling these two important barriers for entrepreneurship. Through the
design of a product-service system the potential field of opportunities is scanned and mapped
in order to find solutions for the most important gaps, which are-in turn-being evaluated by
the process stakeholders. The research-by-design project follows a human-centered approach,
integrating divergent and convergent thinking in the early development stages, in which we
focus on the user's needs throughout the process of starting a business. The resulting product-
service focuses on high potential entrepreneurs with a lot of experience in corporate business,
having the skills for entrepreneurship but to whom the final step for a career switch is too big.
The solution integrates 4 important aspects: finding complementary competences, developing
and enriching business ideas, designing the business and formalizing the cooperation between
co-founders. It also differentiates on required speed in the start-up process and the status of
the business idea at that point. Both the research-by-design process and the resulting solution
build on the product development methodology in the front-end of innovation in which
analysis and synthesis alternate, in order to propose validated solutions for a specific need.

LIMITATION OF ENTREPNEUR
 Social Entrepreneurship is comparatively a new term that developed into the research discipline.

 One of the major finding of the paper is that most of the research paper tries for theory
development in the area of social entrepreneurship, as each of these enterprises are unique, it is
difficult to develop a common definition and framework for all these firms, instead social
entrepreneurship research should focus more on value addition of the firms and creating a bench
mark system for social entrepreneur.

 The limitation of the paper is that this research is not based on the impact factor or citations which
are the modern ways of measuring the quality of a research paper.

 These kinds of research can have multiple impacts on the theory research and practice of social
entrepreneurship.

 This research tries to create a new tradition and culture for social entrepreneurship research.

 The future research can focus more on understanding the social entrepreneurship from an impact
factor or a citation based perspective.
 ENTREPRENEUR AND ITS SCOPE

Entrepreneurship in its capacity stimulates the economy which enables societal

change not only for fulfilling a need but also to generate revenue for the
entrepreneur, entrepreneurship thus provides jobs for the society and develops
communities

The scope of entrepreneurship is far-reaching. 

 Entrepreneurship moves even beyond the closed system of an enterprise.

 

 Entrepreneurship in its capacity stimulates the economy which enables

societal change not only for fulfilling a need but also to generate revenue
for the entrepreneur, entrepreneurship thus provides jobs for the society
and develops communities.

 Entrepreneurship instigates a lot more than the mere creation of business. 

 Entrepreneurship promotes the new business and provides opportunities to

improve the new business sectors. 

In the long back, when washing machines were not invented, women had to
spend their time washing clothes without energy resources or water resources.
This once inspired a new company to sell low energy washing machines. This
would save time which in turn utilised the extra time to educate themselves.  
 
 Bibliography

One does not attain freedom from the bondage of Karma

by merely abstaining from work.
No one attains perfection merely by giving up work

Because no one can remain action less even for a moment.

Everyone is driven to action, helplessly indeed,
by the Guans of nature

The deluded ones, who restrain their organs of action

but mentally dwell upon the sense of enjoyment,
 are called hypocrites

The one who controls the senses by the mind and intellect
and engages the organs of action to Nishkam Karma-yoga
is superior, O Arjuna

Perform your obligatory duty,

because action is indeed better than inaction.
Even the maintenance of your body
would not be possible by inaction.

SUGGESTIONS
1. Develop a statement to encourage entrepreneurship.

2. Create a bond between employees and the company.

3. Celebrate mistakes.

4. Promote ‘intrapreneurship’.

5. Pursue passions in and out of the company.

6. Entrepreneurship is a mind-set.

7. Recognize and reward.

8. Build personal brands

9. Avoid micromanaging

10. Space, time, and stability

Titled Rattan N. Tata: The Authorized Biography, the book chronicles the life of
one of India's biggest industrialists and philanthropists. It is an authoritative biography
with copious details about 84-years-old Ratan Tata's childhood, college years, and his
early influences.
 The Wit & Wisdom of Ratan Tata , From Steel To Cellular
 Objective of Entrepreneurship:

1. Develop and strengthen the quality of entrepreneurship.

2. Removing unemployment.

3. Enhancing industrial development.

4. Developing industrially backward region.

5. Select a project/product.

6. Formulate the project.

7. Understand the process and procedure involved in setting up small

units.

8. Helping the person to understand environmental changes and

opportunities.

9. Acquaint and appreciate the needed social

responsibility/entrepreneurial discipline.
CONCLUSIONS

 To be successful in sustainable business practices often requires

entrepreneurship and innovation.
 Entrepreneurship and innovation are relevant in for-profit and nonprofit
ventures.
 Entrepreneurship can be viewed as recognizing change, pursuing opportunity,
taking on risk and responsibility, innovating, making better use of resources,
 creating new value that is meaningful to customers, and doing it all over again
and again.
 Being an entrepreneur requires taking on significant responsibility and comes
with significant challenges and potential rewards.
 Entrepreneurship is a mind-set, an attitude; it is taking a particular approach
to doing things.
 The motivations for becoming an entrepreneur are diverse and can include the
potential for financial reward, the pursuit of personal values and interests, and
the interest in social change.
 For innovation to be relevant for sustainable businesses, it has to be
meaningful and affect a large number of stakeholders.
 Successful entrepreneurship often requires creativity and innovation in
addressing a new opportunity or concern in a new way.

WEBLIOGRAPHY

I assure that the given information is true....it has been done by

my research by some personal knowledge and some from
practical experiences....and with the help of Google.
 LINK

https://en.m.wikipedia.org/wiki/Ratan_Tata
https://www.britannica.com/biography/Ratan-Tata
https://en.wikipedia.org/wiki/Ratan_Tata